Even Labour – with all its history of snatching defeat from the jaws of victory – believes that the next general election is won.
Where there is less confidence – to the extent that anyone in Labour dares to think about it – is the election after that. Historically, a landslide election victory meant that a government could expect to be in office after the next election, too. Labour might be thinking that they are on the cusp of winning not just the 2024 general election but the 2029 one as well, just as Tony Blair had as good as won the 2001 general election in May 1997. This time, however, the circumstances are different.
The electorate is clearly more volatile than in the past (just look at the transformation in the main party’s standings in the last three years). But the second reason for Labour anxiety about 2029 is economic.
A large part of the Conservatives’ malaise can be attributed to poor economic growth, record high taxes combined with under-performing public services. Growth is likely to pick up a little, but it cannot be assumed that – by the time we get to 2029 – taxes will be noticeably lower or public services noticeably improved. Debt and borrowing are already high, projections for public spending are unrealistically tight, and tax receipts are dependent on an ongoing freeze in thresholds in the personal tax system (which will probably happen) and increases in fuel duty (which will probably not). Labour might blame these problems on their predecessors but that will not be a particularly effective argument by the time we get to 2029.
But the circle can be squared if economic growth can exceed expectations. That is the answer that Rachel Reeves provides when pressed on the difficult choices that any future government appears to face. Higher growth would enable higher levels of public spending and/or a lowering of the tax burden.
The question, of course, is how to deliver it. Given the overwhelming likelihood that this responsibility will fall to her within a few months, there was great interest in her Mais lecture on 19 March. There was little within it by way of specific policies, but it was still the most thorough articulation of “securonomics”. Does this notion offer a route to stronger economic growth?
On three points, there are grounds for optimism. The first is the offer of greater political and institutional stability. There will be no Truss-style wars on our economic institutions, and Reeves herself cuts a reassuring figure. Second is the emphasis on planning reform. The country needs to build more homes and improved infrastructure. She reiterated her commitment to this. Third, there was an acknowledgement of the damage done by Brexit. Labour remains cautious and vague about how to remediate the problems of leaving the EU but at least Reeves recognises publicly the issue. For those hoping for more post-election boldness, her comments give some hope.
But on her bigger argument – a more active and strategic state pursuing “securonomics” will deliver additional economic growth – there are grounds for scepticism. This is not a column arguing for a smaller state or denying that there is much good that government can achieve. It is that the strategic state as Reeves envisages it will be focused on a wider range of objectives that will not always be complementary to economic growth, at least in the short term.
Reeves emphasises the importance of climate change and has announced that Labour will restore the Bank of England’s remit on this issue. That may be right and necessary but moving away from cheap fossil fuels will require short term costs.
She makes an argument for strengthening workers’ rights arguing that this will help improve economic security. Again, this may be true, but employers are justified in worrying that this will increase their costs.
Reeves also argues for greater regional equality and criticises Nigel Lawson’s record in the 1980s which included “the decline or disappearance of whole industries”. The hard truth is that many of these industries were economically unsustainable. Perhaps more could have been done to soften the blow of deindustrialisation but anything that looks like economic nostalgia – the position taken by the British left during this era – is not conducive to higher economic growth. Reeves has some sensible thoughts about agglomeration, greater rigour in infrastructure spending, and an industrial strategy that is focused on our strengths not weaknesses, but her lecture does not dispel the impression that the power of the state will be harnessed to achieve political and social objectives as much as economic ones.
The shadow chancellor also makes the case for economic policy being linked to geopolitical strategy. In this, she is obviously influenced by the Biden administration and, in particular, a speech delivered last year by Jake Sullivan, the US national security adviser. Sullivan and Reeves both make the case that we must avoid being too economically entangled with China and that our focus must be on building our resilience. It is a step away from globalisation on security grounds. Again, there is a perfectly respectable case for doing this, but it will make growth harder not easier.
Decarbonisation, strengthening workers’ rights, prioritising lower regional inequality, and reducing dependence on potentially hostile trading partners will have widespread political support. But there are trade-offs with meeting these objectives and increasing GDP over the next Parliament. “Securonomics” looks like a more compelling political strategy than an economic one.
[See also: Can Rachel Reeves escape austerity?]
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