As part of the Government’s aim to ‘Kickstart Economic Growth’, the Chancellor, Rachel Reeves has made a speech to a group of Oxford business leaders announcing increased levels of public spending on investment and creating "a new Silicon Valley" in the UK.
The Government’s economic policy is to stimulate economic growth with a partnership of public-private initiatives and the complicating factor of “no trade-off between economic growth and net zero”.
Key announcements from the speech include:
- An increase in the UK’s public investment to 2.6% of GDP (from 1.9% under the previous Government).
- Delivering a ‘Oxford-Cambridge Growth Corridor: a new Silicon Valley in Europe:’
- Building the infrastructure and partnerships needed to join up the region’s academia, investors and business with the construction of 4500 new homes, investment in rail infrastructure to and from the regions and an expansion of Research & Development into artificial intelligence and life sciences by Cambridge and Oxford Universities and their spinoffs.
- These will boost the UK economy by up to £78 billion by 2035, according to industry experts.
- Backing ‘Metro Mayor’ plans, such as Manchester's Andy Burnham's plans for the redevelopment of Manchester United's Old Trafford site to Create new housing and Commercial development around a new stadium.
- Backing plans for a third runway at Heathrow Airport.
- Recreating South Yorkshire airport city as a regional airport.
- Reforming planning policies so that developers should not have to worry about "the bats and the newts" (a reference to the cost of £4,760 per bat for a bat tunnel on the HS2 line).
- Investing £63m into the advanced fuels fund over the next year to encourage more investors to back production in the UK, bringing good, high-skilled jobs to areas like Teesside.
- Two new national wealth fund investments: £65m for Connected Curb to extend their electrical charging network and a second £28m equity investment in Cornish Metals, which provides the raw material for solar panels, wind turbines and electric vehicles.
- Working with the US new Treasury Secretary to deepen economic relationships.
- Resetting a relationship with the UK and Europe.
Tax changes: none announced
The Chancellor has previously said that she is committed to 'one fiscal event a year'. No tax announcements were made in today's speech.
There has been substantial criticism of the Government over the effects of changes to employment rights and takes, e,g, the rise in the National Minimum Wage and Employer’s NICs for certain employers (there is a corresponding increase in the Employer's NICs allowance). On employment, the Chancellor noted in the speech ongoing plans for:
- A reform of the welfare system, with a focus on disability benefits as part of the policy in 'getting people back into work'.
- Reducing net migration, but taking back control means having more of a say about who comes into this country.
The Treasury notes that this speech comes after the Chancellor last week announced a new approach for the National Wealth Fund (NWF) (formerly the UK Infrastructure Bank) and the Office for Investment (OfI) to work with local leaders in building pipelines of incoming investment and projects linked to regional growth priorities. This includes the NWF trialling Strategic Partnerships in Greater Manchester, West Yorkshire, West Midlands, and Glasgow City Region and the OfI piloting an approach in the Liverpool City Region and the North East Combined Authority to connect their regions to central Government and industry expertise to unlock private investment.
Editorial Comment
The Government is following its pro-growth strategy and this month, Rachel Reeves has been talking up its economic plans to counteract what it alludes to as the ‘miserabilist’ agenda of its political opponents. Casting all politics aside, while all economists generally acknowledge that economic growth is essential if the Government is to achieve its goals, economists hold widely different opinions as to how that growth might be achieved.
This Labour Government’s economic policy rests on seven 'pillars': economic and fiscal stability; investment, infrastructure and planning; place; people; industrial strategy and trade; innovation and net zero. It has renamed the UK Infrastructure Bank to establish the National Wealth Fund and a new state-run energy company (Great British Energy) is being formed. It has plans to reform the public sector, but its initial phase is to raise funds to meet its funding commitments.
Environmental campaigners may be dismayed by the plans for Heathrow. However, the Government also has plans for investment in railways, water infrastructure, solar and advanced fuels that may compensate to a lesser extent. Legislation is going through Parliament on the Great British Energy (GBE) Bill. GBE will be a publicly owned energy company designed to drive the deployment of low-carbon, ‘clean’ energy.
Meg Hillier, chair of the Treasury Committee has asked the Chancellor if she will be making a statement to the House alongside the Spring OBR forecast in which she might set out any alterations to the Government’s fiscal policy if it looks as if her fiscal rules will not be made by then. A reply is due today.