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1 day ago
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It has been a tough beginning to the year for Rachel Reeves. The chancellor has found herself in the spotlight as debt interest costs spiralled, while consumer and business confidence fell. Manufacturers, hampered by high energy costs and the consequences of Brexit, are struggling, while Donald Trump’s threats against those who dare to trade with the US are unsettling.
It’s not a completely new situation. Since the budget, Reeves has been criticised for the mix of tax rises and higher borrowing needed for what is only a modest rise in government spending over the next couple of years. Businesses are angry that much of the tax burden has fallen on them. Consumers, uncertain about the nation’s prospects, hunker down. If they spend big, it’s on a foreign holiday to escape the gloomy atmosphere at home.
In response, Reeves has delivered an almost daily round of initiatives. Many appear designed to appease business leaders and convince them that higher taxes are a small price to be paid for higher growth. Central to the debate is where growth will come from and what kind of growth will it be.
Reeves was right to focus in her budget on building the platform for green growth by encouraging investment in digital technology and electricity generation and storage. The Conservatives were confused about how quickly to adopt electric cars and what should be done to insulate homes. In both cases, the situation is beginning to become clearer and government support more consistent and progressive.
Yet Reeves undermined the seriousness with which the government was pursuing net zero by cancelling railway upgrade projects, and saying last week at the World Economic Forum in Davos that airport expansion in the south-east was high on her agenda. On Wednesday, there should be some clarity about how these moving parts fit together when the chancellor talks about what she means by growth in her first speech of the year. Let’s hope that six months inside the Treasury will have shown that pulling on the same tired old levers is not going to spark the economy back to life.
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There should be some progress once Reeves and Keir Starmer implement their plan to force Whitehall departments – and Labour’s new institutions such as the national wealth fund – to engage locally rather than issue top-down missives about how to target investment. This kind of local engagement is novel in England and needs to be imposed, at least initially. Siloed civil servants generally resist collaboration and need more than gentle encouragement to participate meaningfully.
Councils also need direction. They have tended to follow a three-pronged programme stretching back decades. First, freshen up the high street to attract shoppers. Then give the university, if there is one, free rein to build student accommodation and academic facilities where it likes. And in tandem, sign up property developers whenever possible to build homes and commercial premises unburdened by demands for extra amenities or green space.
Andy Burnham, the mayor of Manchester’s combined authority, said last week that he could add £1bn a year to its economy with the redevelopment of six “growth” locations. One of these is the area around Old Trafford, should the Manchester United board rebuild or refurbish the football ground. If he can avoid turning it into a professional ghetto, which is what developers always want, he will make Manchester an even more attractive place for people to live and businesses to flourish.
If brighter, more attractive “livable” cities are at the heart of good growth, based on a greener infrastructure – renewable energy, electric transport, well insulated homes and green spaces – combined with low levels of crime and good schools, the north can, in the words of Mark E Smith, rise again.
The UK needs the north, the west and Midlands to begin enjoying the benefits of growth – not just London and the south-east. Only then can Reeves begin to put the bad news behind her.
