Ready for a bright new dawn?

By Ben Lucas and Mike Emmerich | 26 March 2024

General Elections are moments of big change: 1945, 1979 and 1997 were turning points. The one that awaits us later this year could be another.

We generally underestimate the importance of big General Elections. They do not happen that often and memories fade. Even so, we are still prone to hanging on to every statement ahead of elections, searching for deep insight into what lies ahead.

So it was with the much trailed speech shadow chancellor Rachel Reeves gave as her Mais Lecture last week. It was spun (or reported) as her 1979 moment. Even before it was given, the commentariat took the bait, with one left wing economist describing it as ‘depraved’, perhaps because of the promise of an (undelivered) endorsement of Margaret Thatcher.

If this is the billing, what, then, was the content? In a word: substantial, possibly the most social democratic speech since the 1960s by a mainstream shadow Labour chancellor.

It is a clear shift away from New Labour, with an active state, a muscular industrial strategy, protection of national interests, stronger workers’ rights and ambitious regional policy. All of which she calls Securonomics.

There was also much on fiscal rectitude, strong language on much- needed growth and a commitment to an open(ish) market economy.

Decarbonisation is still a major theme and for the Treasury in waiting there was a pretty full-throated denunciation of the worst excesses of our recent economic model on working people, the environment and on the institutions of the state. This was a speech that did not lack vision.

Reeves’s local agenda was clear in its diagnosis: regional inequality and our failure to tackle it was denounced. She gave a scholarly analysis of the power of agglomeration to drive growth. As nationally, innovation and clusters strategy will have a key role. And Reeves committed to giving regional and local leaders key economic powers. There was little detail on this, other than on devolution of skills. But this will surely have to include a new partnership with mayors and council leaders to jointly drive and deliver industrial strategy, through local economic plans, and a pipeline of investable projects that can shift the dial on local growth.

She was unambiguous on land use planning – described as ‘the single greatest obstacle to our economic success’. Councils will be expected to deliver on housing. We can expect early pressure from the Treasury, particularly on districts, whose get-out-of-jail card from Michael Gove on housing numbers is likely to be rapidly rescinded.

The choices facing Reeves and every would-be leader in the West are unenviable. The tension between the need to spend big on infrastructure, innovation including low carbon, and skills sits ill with weak public finances. And left unchecked, as it will be without that investment, the power of agglomeration will continue its highly differentiated effects. But these and other awkward truths were left unspoken. Rightly. Probably.

The point of the speech was to mark a departure. At its heart was a seriousness about public policy and the role of state institutions in driving growth. At this stage, the direction is more clear than the detail. She wants to avoid traps and the chancellor stealing any more of her policies as he did on non-doms and the windfall tax.

But for Reeves and for Britain, the policies arising from her new framework are critical. She did set out a few policy hooks that can be built on, such as giving the Office for Budget Responsibility a new responsibility for reporting on capital spending, which combined with treating borrowing for investment differently from for revenue, could be her new Golden Rule in government.

We will need to wait longer for the rest of the detail, probably after the election, if Labour wins. How much growth, the extent of inclusion and its regional impact will, if she takes office, be on her and all of us to maximise.

Mike Emmerich and Ben Lucas are founding directors of Metro Dynamics

X – @metrodynamics

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