Fiscal Conservative: Rachel Reeves wants to banish the idea that the Labor Party is anti-business
Shadow chancellor Reeves is fascinated by Labor prime minister Harold Wilson. When I revealed my own interest in him, she arranged for an inscribed copy of a new biography of her parliamentary colleague Nick Thomas-Symonds to be delivered to my desk.
Wilson had great political instincts and a vision for Britain. His speech about unleashing the “white-hot heat of technology” still resonates today. And his government fought to combat the Treasury’s fiscal power by establishing a new Department of Economic Affairs.
He attempted to establish an early version of what Reeves calls “securonomics”, with a National Business Board (NEB) willing to intervene to give Britain a technological advantage. He was a key backer of what was for a time the UK’s cutting-edge computing giant, ICL.
So far, Reeves has failed to evoke Wilson’s rhetorical flourishes. But I understand that advisers to Reeves and shadow business secretary Johnny Reynolds are developing a revised industrial strategy.
Reeves, a former Bank of England official, has adopted the tough demeanor of a fiscal conservative. Wealth creators view his closing of ‘loopholes’ in tax policies with horror, with North Sea oil chief Andrew Austin speaking of the ‘devil incarnate’. But a Labor victory in the autumn seems inevitable.
Reeves’s main aim is to banish the idea that the Labor Party can be anti-business or wasteful. Labor deputy leader Angela Rayner’s ‘New Deal for Working People’, which bows to the party’s union funders, is about to detox amid discontent from Rupert Soames, chairman of business lobby group CBI, among others. The proposed ban on zero hours contracts will be replaced by contracts that offer a regular working pattern. Instead of full employment rights from the first day in a new job, it is proposed to propose a trial period.
Reeves has offered few clues about how he will boost production, but he does see growth as the key to success. He wants Treasury to embrace a growth mission in everything it does. There will be no NEB, but the same results could be achieved with a large British fund investing in local technology.
Reeves and Reynolds want to revive a broader plan. Labor has already indicated it wants to reshape the rail industry with a Great British Railways Company that will be responsible for timetables and improving services and infrastructure.
A key aim of Labor advisers has been to give leader Sir Keir Starmer and Reeves, who lack private sector experience, as much exposure as possible to UK business leaders.
Some companies, such as misbehaving water companies, are seen by unions as natural monopolies that do not lend themselves to much competition. Depending on your strategy, there will be a much greater willingness to intervene if necessary.
Another key objective is to unlock funding to harness the UK’s technological skills. Running the pension funds will be part of this. Reeves wants a British version of the French ‘Tibi’ plan. It will require defined contribution pension funds to invest a proportion of their assets in UK growth assets.
Reestablishing previous efforts to increase research and development spending and setting more challenging targets could also be key elements of a new industrial strategy.
There will be concern in the business community that Labor will seek to achieve its objectives through higher taxes. Closing loopholes and cracking down on tax evaders may seem quite benign. But, as oil drillers have indicated, they could undermine energy security, investment and business.
Businessmen do not necessarily make the best politicians. But in the case of the Labor Party, a lack of entrepreneurial skills and instincts risks stifling bold ambition.