Rachel Reeves – 2022 Keynote Speech on Labour’s Economic Strategy
The speech made by Rachel Reeves, the Shadow Chancellor of the Exchequer, in Bury on 20 January 2022.
It’s great to be in Bury today – a town with a central place in the story of our industrial heritage and in our economic future.
Home to John Kay, the inventor of the flying shuttle which made Lancashire home to Britain’s thriving textiles industry.
Birthplace too, of Sir Robert Peel, the last Prime Minister to split the Conservative Party. And why did he do so?
Because the Conservatives would not put the interests of the people of this country ahead of the interest of a well-connected, elite. How times change.
And so it is particularly fitting to welcome Bury South’s own Christian Wakeford to the Labour Party. Christian, like so many others, sees that our country needs Keir Starmer’s leadership and a Labour government now more than ever.
And it is great to be joined by James Frith, the former Labour MP for Bury North, and someone who I know will play a big part in Labour’s future too.
But I am here to talk about Britain’s economic future, and our potential as a country.
We are a country with so much going for us.
Dynamic industries with reach all around the world, not least our cultural industries, with venues all around the country, like the Met, where we are today – giving life to our towns and cities.
And millions of working people able to make a lasting contribution to the future of our country.
The question is: why is a country with such rich resources not seeing that potential realised? Why are so many working people here in Bury and all across the country not feeling the benefits?
And how have we become trapped in this cycle of low growth, low pay, and high taxes?
The answer is simple. It comes down to a decade of Conservative failure.
Their failure to plan ahead.
Their failure to work together with business and industry.
And their failure to put the national interest above the interests of their friends and donors, utterly removed from the lives of working people.
For the best part of a decade, I worked as an economist at the Bank of England.
My first job there was to analyse the Japanese economy. Japan had just reached the end of what was often called its ‘Lost Decade’. We now talk about Japan’s ‘Lost Decades’ – thirty years of stagnant growth.
I saw the perils of an economy becoming trapped in a cycle where demand is sucked out of the economy and growth suppressed.
Britain has been through its own lost decade.
And so Covid hit us harder than other countries, in terms of lives lost, and the hit to our economy.
We have a choice.
We can continue down the path of another Lost Decade. Or we can take an approach based on bringing people together in a national endeavour, and on understanding that Britain’s real wealth is found – not in the bank accounts of friends and donors of the Conservative Party – but in the effort and talent of tens of millions of working people in this country.
Labour has a plan to build a stronger economy based on exactly that approach.
A plan to give people the respect they deserve.
A plan for real economic security.
A plan for prosperity in every part of Britain.
That is the plan that I will set out today.
But first, let’s look at where we are. While ministers worry only about the political costs of their parties, ordinary people are facing a cost of living crisis – with prices rising at the supermarket and the at petrol pump, energy bills soaring, and real wages falling.
People rightly expect leadership from government.
But instead they are being left to shoulder the burden alone, with the added insult of the triple whammy of a freeze on the income tax threshold, rising council tax, and a hike in National Insurance contributions.
Now is the wrong time to raise taxes on ordinary working people.
Labour would keep bills down by cutting VAT on energy, and expanding the Warm Homes Discount, taking at least £200 off the typical bill – with up to £400 in additional support for low and middle earners and pensioners – paid for by a windfall tax on North Sea oil and gas profits.
But this isn’t just about the short-term. As Professor Dieter Helm has shown, the global spike in gas prices has exposed the government’s failure to plan, leaving us uniquely exposed.
And it’s not just energy. That is just one chapter in a decade-long story of economic failure.
Between 1997 and 2010, when Labour were in government, the UK economy grew at 2.3% a year. Over the decade leading up to the pandemic it grew by an average of 1.8% a year.
And now the Bank of England expects growth to fall to as low as 1 per cent by the end of this Parliament, while other countries in the OECD are expected to grow at almost twice that rate.
This is the British economy according to Rishi Sunak.
No matter how much he tells us he wants to keep borrowing down and taxes low, the effect of such anaemic growth is devastating for our public finances.
If we could catch up with the growth rate of our best-performing peers, by 2030 the UK would have £75bn more in tax receipts – a growth dividend able to ease the burden of taxes on working people and start to repair the damage done to our overstretched public services over a decade of underinvestment.
Another Lost Decade isn’t inevitable.
These failures sit squarely on the shoulders of the Conservatives. Their policies have choked off growth and squeezed living standards.
The Conservatives have become the party of high taxation because they are the party of low growth.
But the choices they make on tax show whose side they’re on. And it’s certainly not the side of the tens of millions of people hit by the cost of living crisis.
Their approach isn’t just unfair – though it is.
It isn’t just going to make life that much harder for working people – though it will.
It won’t work.
As the TUC General Secretary Frances O’Grady has said:
‘Our economy will only recover when working people can afford to spend in local shops and businesses’.
I’ve been hearing the same from businesses I speak to, concerned that customers will stay away as they feel the hit to their purses and their wallets.
It’s a vicious circle. Tory policies fail to deliver growth, and their response is policies that squeeze growth further.
It’s like trying to drive with the brakes on.
It’s no wonder the Tories have failed to deal with the cost of living crisis, because the Tories are the cost of living crisis.
We need a serious plan to deliver higher growth, built on the knowledge that wealth doesn’t just trickle from the top down, but comes from the bottom up and the middle out.
A plan that can drive up living standards, fund the public services we need, and allow us to get the national debt falling.
Under Keir Starmer’s leadership, Labour has changed, but so too have the Conservatives.
The Conservatives once called themselves the party of business. That’s a distant memory.
When the Prime Minister said ‘F- business’, I thought it was a throwaway remark. Little did I know it would be the central organising principle of his government.
And what’s left?
A government concerned not with unleashing the talents of British people, empowering the next generation of entrepreneurs, supporting British business, and sharing opportunity widely, but instead with selling access to the corridors of power.
A party not of productive business, but of crony capitalism. A government of waste – wasted money, wasted talent and wasted potential. This calls for a new contract between government and the British people.
That is what underpins Labour’s plan.
A plan to break us out of this cycle of high taxes, high prices and low growth.
A plan to get our economy firing on all cylinders, in every part of the country and every sector of the economy.
A plan that is proudly pro-worker, and proudly pro-business.
A plan for an industrial Britain, a learning Britain, an investing Britain, an innovative Britain, and a trading Britain.
Let me set these out.
First is a serious strategy for an industrial Britain, fit for the 21st century.
Where the Conservatives scrapped their own Industrial Strategy Council, Labour will create an industrial strategy built on an ethos of cooperation across the public and private sectors, employers and workers.
To unlock the brilliance of our leading businesses and entrepreneurs, mobilising these immense resources to create good work and economic growth in every part of Britain, and ensure that our communities can take pride in great British industries.
Britain has great strengths, whether in our world-leading creative industries, our automotive sector, or life sciences.
We have advantages in industries that will be vital to our green transition, including tidal and wind energy as well as the technologies needed for carbon capture and storage, and we already have great businesses leading the way, like Switch Mobility, in my own city of Leeds, who are pioneering the transition to electric buses – cheaper and better for the environment.
And initiatives we will build on like the UK Battery Industrialisation Centre, supporting the scale-up of the manufacture of batteries for electric vehicles and other applications.
Labour will continue to work with industry to develop plans for these and other sectors.
Of course industrial strategy is about making sure that we are succeeding in the most high-tech industries.
But it’s not enough for an industrial strategy to focus on a small number of businesses in a small number of sectors.
As the University of Manchester’s Karel Williams has long argued, we must attend to the foundations of our economy, without which we could not enjoy healthy lives or strong communities, but which have been neglected by government for too long.
Whether that’s our high street businesses, or sectors in which millions work to provide us with care, transport, energy and water, and food on the shelves.
It’s what I call the everyday economy.
Millions work in it. We all rely on it.
The state of our everyday economy really matters.
Because driving up pay and conditions in the everyday economy is key to increasing spending power in our communities and reviving our high streets.
Because if we want to drive up national productivity then it’s not only a few businesses at the leading edge which need to feel the benefits of new technologies and investment.
And because those foundations provide us with security as a society – especially when a crisis hits.
That calls for industrial strategies for sectors like care which have too often been overlooked, breaking loose of our cycle of long hours, low pay and low productivity, with a new deal for work.
And supporting those businesses which give life to our high streets by abolishing business rates and replacing them with a fair system that levels the playing field between online multinationals and high street businesses.
A real plan for the economy begins with the understanding that those industries of the future and the overlooked sectors on which we all rely are two sides of the same coin – the success of each dependent on the other – that no matter how innovative, no business can thrive without those strong foundations.
And any government serious about the strength of our economy and the welfare of our people will have a plan for both to thrive, together.
Second: we need a learning Britain.
We must ask ourselves how any country can achieve its potential when over 200,000 primary age children live in local areas where there are no good or outstanding schools, while record numbers of businesses report challenges getting the skilled staff they need.
Keir Starmer has set out a plan to make sure every young person leaves education ready for life and ready for work, with the practical skills, the careers advice and the experience they need to thrive in a modern economy.
And Labour has launched a new Council of Skills Advisers last year, to rethink how we approach skills for the decades ahead.
We need to expand opportunities for school leavers too.
But the Conservatives have shown themselves incapable of reversing the decline in apprenticeships, which has seen nearly 200,000 opportunities lost under their leadership, including a fall of 50% in the number of 16 to 18-year-olds starting an apprenticeship.
Labour would start now with our plan to create apprenticeship opportunities for young people – which could have seen one hundred thousand extra apprenticeships created this year – to drive our economic recovery.
Third: an investing Britain.
Over the last decade, a lack of investment has been holding Britain back.
In the nine years leading up to the pandemic the UK ranked third last out of the 38 countries in the OECD for investment as a proportion of GDP. And over the next five years, the UK is forecast to have a near £800 billion investment gap compared to other OECD economies.
The Director of the CBI, Tony Danker, has been clear about what’s needed: supporting business to invest, he says, will require ‘catalytic public investment’.
That’s what Labour’s climate investment pledge does – £28bn every year for each and every year of the decade – to ensure the industries and jobs of the future are found all across Britain.
Giga-factories to build batteries for electric vehicles, a thriving hydrogen industry, offshore wind with turbines made in Britain, planting trees and building flood defences, getting energy bills down and guaranteeing Britain’s energy security, and allowing our economy to adapt as we drive down our carbon emissions.
This is a global race for the jobs of the future.
As the former governor of the Bank of England Mark Carney has said, we will require significant private investment alongside public to meet the challenges and opportunities of net zero.
Our climate investment pledge will leverage at least as much again in private investment, by giving businesses certainty and confidence.
We will also catalyse private investment by supporting businesses to focus on the long-term good of the company, through changing the priority duty of directors, and by replacing business rates with a new system of business taxation that properly encourages growth and investment.
Labour’s fiscal rules would ensure that necessary investment can take place in a way that supports sustainable public finances, not unlike the government’s rules which have already to led to the cancellation of the Northern Powerhouse Rail.
As well as an investment Britain we need an innovative Britain.
A Labour government will create the conditions for new, innovative businesses to start, grow and thrive – whether that is through a fair tax system that encourages and rewards growth, or by directly supporting the next generation of entrepreneurs through our target to help create 100,000 new businesses over the next five years – with a particular focus outside London and the South East.
Initiatives like B Corporations and The Purposeful Company show how a new way of doing business is on the rise, one that understands the value of working in partnership with workers and communities.
Keir Starmer has committed the next Labour government to a minimum target of three percent of GDP invested in R&D, from both the public and private sectors.
53% of UK research and development funding is directed at London and the greater South East – which benefits hugely from the Golden Triangle of London, Oxford and Cambridge.
The comparative total for the entire north – from Newcastle to Bradford, Wigan to Grimsby – is just 16%.
We will support our northern universities, colleges and businesses not just to drive innovation, but to make sure that the fruits of the work of our leading scientists and institutions benefit small and medium-sized business, and are felt across our regions – so we can drive up productivity across the economy.
And there are great examples of work already being done and potential to be unleashed with the right support.
Like Northern Gritstone, a patient capital venture headed by Lord Jim O’Neill, formed in partnership with the universities of Leeds, Manchester and Sheffield with the aim of providing a pipeline for research to develop into successful businesses – creating wealth and jobs.
Britain is a country of creators, of makers and of problem-solvers.
We need a government that understands the value of our collective ideas and innovations, from the shopfloor to the boardroom.
And to unleash our potential we will build a trading Britain.
A truly patriotic government will champion British businesses at home and abroad.
The first step is to make Brexit work for the British people – addressing the flaws in the Tories’ deal that are hitting our food and drinks manufacturers, creative industries and professionals.
A Labour government won’t stand by on the side-lines and let British businesses and consumers pay the price for the mess the Tories have made. And we will seize new opportunities for British businesses to thrive at home and abroad.
We are a competitive and highly-skilled nation. We can work with our friends and neighbours to raise standards and do trade better.
We will build on the UK-EU trade deal in the interests of British businesses to cut red tape and make life easier for our exporters.
And with our plan to buy, make and sell more in Britain, we will use all the tools at government’s disposal to support businesses in this country – leading a culture change at the heart of government, putting local industries first and ensuring major infrastructure projects use, where possible, materials made here in Britain.
Asking every public body to increase the number of contracts to British firms, big and small to grow our industries and increase standards, while strengthening domestic supply chains and investing in the reshoring of jobs back to Britain.
Running throughout this Plan is a commitment to a stronger economy for every part of Britain.
In too many parts of our country, confidence in the future does not yet match pride in the past.
I spent three years working at HBOS in Halifax, so I know well what it can mean to a town to have a world-recognised business rooted in the local area.
But investment, jobs and opportunities have not been evenly spread across the country and it’s taken its toll on families and working people. Many people have had to move many miles away to find decent opportunities to get on.
So our mission is to create more and better jobs that are closer to home, so people have a real choice.
As research from IPPR shows, the Tories have taken £413 from every person, through cuts to local council funding, with just £32 returned in levelling up for the North.
Even then, the government doesn’t trust people to set out their own priorities, adopting a top-down approach.
It’s people on the ground, in their communities, who best understand what they need – the assets they can build on, and how to fulfil their ambitions.
There’s so much creativity in our regional towns and cities, building on our industrial past but adapting to the economy of the future.
Like Castleton Mills in my own constituency, once a key part of West Yorkshire’s textiles industry, but now a creative, collaborative space housing freelancers, remote workers and start-ups – including Northern Bloc Ice cream, and businesses from music promotion to digital content.
This creativity and resourcefulness is there to be unleashed all across our great country.
The Prime Minister’s survival strategy may involve wrecking our historic institutions and dragging the country’s global reputation down with him, but I reject the idea our best days are behind us – that we are fated to weaker growth and diminishing living standards.
There have never in living memory been so many opportunities for investment in new industries, new jobs, and new growth that can be felt in all parts of the country.
We need a future-looking government, working in a spirit of cooperation with businesses and trade unions to plan for the long term, to seize those opportunities.
The choice ahead of our country is this:
Another Lost Decade of low growth, high taxes, and a deepening cost of living crisis.
Or a contract between British government and the British people, a national effort to build a stronger economy, more resilient public services – and prosperity felt in every part of Britain.
That means real economic and energy security.
It means good jobs and thriving businesses in every town.
It means strong public services paid for by fair taxes and strong growth.
It means Britain’s best days lie ahead.
Thank you.
