Remember “securonomics”? Once the leitmotif for Joe Biden’s administration, it was enthusiastically embraced by Rachel Reeves as shadow chancellor in a landmark speech she gave in the US capital in May 2023. Prioritising national economic strength and resilience in the face of an uncertain world, she said, was going to usher in a new settlement to replace the failed Washington consensus of hyper-globalisation, free trade and outsourced industrial production, which had hollowed out Britain’s productive capacity and reduced the living standards of millions of people.
It was a transformative vision. Then the hike in inflation put paid to Biden’s re-election prospects, while Labour retreated to economic orthodoxy in the run-up to last year’s general election and for the first six months or so in office. Securonomics seemed dead and buried, while the zombie of George Osborne has burst out of the ground to replace it.
Yet the world has changed (again) since the October 2024 Budget. Trade and technology wars in the wake of Donald Trump’s return to the White House and the need to bolster the nation’s defences against Vladimir Putin’s revanchist Russia have given the government a second opportunity to put security at the heart of its overarching political and economic plan. “Secure at home, strong in the world,” is how the Prime Minister likes to put it. Tomorrow’s Spring Statement (26 March) and the Spending Review in early summer will tell us whether the government has the determination to turn slogans into a credible, comprehensive strategy, one that rescues not only Britain’s economy but its international integrity.
Increasing defence spending from 2.3 per cent to 2.5 per cent of GDP per year is a start, though it will take double that to rebuild the UK’s armed forces after decades of decimation under successive governments. That is why so much depends on its industrial strategy. The fundamental problem has been that as a country we have had lots of industrial strategies, but they have neither stuck nor been scaled. The endless changing of policy has made any piecemeal reform wholly ineffectual, leaving in place a lopsided economic model that is over-reliant on service sectors in London and the south-east. Yet wealth has not cascaded from the City down into Britain’s provincial gullies, let alone “trickled down”. Wealth has been concentrated in fewer hands, while whole industries disappeared and vast swathes of the country have declined.
Last autumn’s green paper on industrial strategy lacked focus and bite, with too many superstar sectors and too few policy priorities. Security provides the pivot around which the government could and should reorganise its key policies – defence, industry, energy, technology, skills and regional regeneration. As an organising principle, security can tie together the eight “growth-driving” sectors in the green paper, which include defence, clean energy and advanced manufacturing. Developing the latter partly through higher defence spending is one way, while greater investment in digital and technologies will contribute to an improved defence capability.
In turn, more manufacturing and industrial capacity will require not just better statecraft – hence No 10’s interest in rewiring the central state machine, from dismantling NHS England to thinning the civil service – but also the channelling of capital into larger productive capacities using financial and business services. None of this can be done without greater national energy generation, which means a mix of nuclear with renewables – particularly through small modular nuclear reactors, solar and wind energy.
Key to the success of a security-shaped industrial strategy is to link it to places and people. Advanced manufacturing and the defence industry are mostly located outside the already prosperous, productive areas in London and the south-east. That is where the increase in public and business investment needs to be located. The government can make good on its promise to spread opportunity and boost living standards in every part of the UK, one of the Prime Minister’s “measurable milestones”. For this to happen, the government will need to repurpose and redirect skills spending towards AI but also engineering and technical training, giving higher education and further education colleges in deprived areas more autonomy over designing and delivering skills programmes.
Faced with the imperative of enhancing national resilience, the argument that there’s no public money simply won’t wash. If the arbitrary fiscal rules stand in the way of more sustained public investment, then the government has every economic and geopolitical reason to change them. And if we need to grow national assets, then let’s find ways of tapping into the patient capital of UK pension funds, as economists such as Andy Haldane and Will Hutton have rightly argued. The government would also do well to remember that the best way to unlock greater business investment is by having a credible growth plan and sticking with it, and that a national wealth fund needs to be decentralised if it is to address the needs and interests of places that have fallen behind. A more economically and geopolitically secure country involves nothing less than a fundamental overhaul of our national institutions, not least HM Treasury.
Reports about the demise of “securonomics” have been greatly exaggerated. While on the left the hope of a second Biden presidency died, security and economic stability have become further entwined. When she rises in the Commons tomorrow afternoon in the hope of displacing a bitter and pessimistic economic mood, their synthesis should be at the heart of her thinking.
[See also: Why you can’t trust economists]
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