The UK opposition’s pick to manage the economy outlined plans for a more activist state if her party comes to power, saying a Labour government will invest in strategic industries to boost Britain’s economic self-reliance.
(Bloomberg) — The UK opposition’s pick to manage the economy outlined plans for a more activist state if her party comes to power, saying a Labour government will invest in strategic industries to boost Britain’s economic self-reliance.
“There’s an emerging global consensus building about security, resilience and strength,” Shadow Chancellor Rachel Reeves said in an interview with the Bloomberg UK Politics Podcast. Britain’s main opposition party aims to make the country “more resilient in the face of the shocks that we have been exposed to these last few years,” she said.
Western nations have been reviewing supply chains in light of the disruption caused by the Covid-19 pandemic and Russia’s war in Ukraine, while also seeking to cut dependence on imports of semiconductors from Taiwan because of the threat posed by China.
Reeves and Labour Party Leader Keir Starmer are trying to seize the mantle of the “party of business” that’s traditionally touted by the ruling Conservative Party. At the same time, they’re gambling that a more interventionist approach from government, targeting growth in key industries such as life sciences and green energy — will prove attractive to investors. Reeves called the approach “securonomics.”
The UK has been “too unambitious about the role an active state can play, too willing to believe that wealth will trickle down,” the shadow chancellor is due to say in a speech in Washington on Wednesday, according to a statement from her office. “A modern supply side approach in Britain would see us rebuild our industrial strength.”
Prime Minister Rishi Sunak’s Tory government is currently grappling with how interventionist the government should be as it ponders a response to US President Joe Biden’s massive package of subsidies and tax breaks for green industries enshrined in the Inflation Reduction Act. Chancellor of the Exchequer Jeremy Hunt said said last week that ministers are considering subsidizing clean energy firms to combat the US legislation, which threatens to attract investment that might otherwise head to the UK.
Read More: How US Green Deal Has Opened Floodgates for Subsidies: QuickTake
But on Tuesday, Sunak warned against Group of Seven nations entering “subsidy races” in light of the US act and instead said he favored “smart” economic policies and regulatory changes to boost growth.
“Subsidy races that essentially just shift capacity between allies in some kind of zero-sum competition are not appropriate,” he said. “We shouldn’t be doing things at the expense of each other.”
Labour have led Sunak’s Conservatives by a double-digit margin in national polls for months. That means that with a general election widely expected next year, investors are paying increasing attention to what Starmer and Reeves say. Sunak must call a vote by January 2025 at the latest.
Reeves said that there’s been an “antagonistic relationship” between Britain and the European Union since the before the Brexit referendum in 2016, and that it’s a Labour priority to “normalize” relations by securing improvements to the divorce deal.
“There are many things about the current deal that are not working well enough for businesses and investors,” she said. That’s “shortchanging us as a national economy.”
She pledged to improve the economic relationship by securing mutual recognition of professional qualifications, ensuring participation by British universities in the EU’s Horizon program for science, and reducing red tape faced by touring artists.
The shadow chancellor also said she would reform the pensions sector to unlock more funding for startup and scale-up firms and stop them looking to New York, where she said there’s a deeper well of so-called “patient” capital. She pledged reforms to the British Business Bank to help it invest alongside pension funds in firms with growth potential.
“We can get a better return for pension savers and also support those fast-growing industries in the UK and keep them in the UK,” Reeves said.
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