Shadow chancellor Rachel Reeves giving her speech at the Mais lecture held at the Bayes Business School in London. Photograph: Stefan Rousseau/PA WireThe good news confronting the next UK government is that it will be hard for economic performance to get worse. The bad news is that it will also be hard to make it much better.
In 1997, the incoming New Labour government, led by Tony Blair, enjoyed the luxury of rapid economic growth: according to IMF data it averaged 3.4 per cent a year from 1997 to 2001, inclusive. Gordon Brown, his chancellor, had a cornucopia to distribute.
The lecture started, rightly, by recognising the priority of ending stagnation. This, Reeves argues, demands a new model of economic management guided by three imperatives: stability; “stimulating investment through partnership with business”; and reforms that will unlock productivity. Her big theme here, one on which we should agree, is that without widely-shared growth, democracy itself could be in peril.
So, how might all this work? On stability, Reeves intends to maintain the mandate of the Bank of England and strengthen that of the Office for Budget Responsibility. Sensibly, she wants to focus on the full public-sector balance sheet while targeting the current, rather than the overall, fiscal balance. This should reduce the tendency to slash investment whenever fiscal difficulties emerge.
Finally, on reform, she rightly emphasises the need to deal with the country’s ossified planning system. If Labour tackles that, something important would have changed.
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