Rachel Reeves has shown she takes her growth seriously

Wednesday, July 10, 2024 5:26 AM

LONDON, ENGLAND – JULY 8: Chancellor Rachel Reeves delivers a speech at the Treasury on July 8, 2024 in London, England. Newly appointed Reeves delivers her maiden speech to an audience of leading business figures and senior stakeholders, announcing the first steps the new government will take to deliver economic growth at the Treasury. (Photo by Jonathan Brady – Pool/Getty Images)

By announcing a package of planning reforms in her first speech as Chancellor of the Exchequer, Rachel Reeves has tackled the biggest barrier to economic growth in Britain today, says Iain Mansfield

The new Chancellor takes economic growth seriously.

By putting planning first in her maiden speech, Rachel Reeves has addressed the biggest obstacle to UK economic growth, as Policy Exchange has shown in Homes for growthincreasing house building by 100,000 homes a year could add £17.7bn to the UK economy. Yesterday, the Chancellor set out not only his ambitions but also a series of specific actions to reform the planning system, including reintroducing housing targets for local authorities, building on the grey belt and supporting local authorities with 300 new planning officers.

Reeves’ ambitions extend beyond housing to energy and data infrastructure. And rightly so: the UK’s bloated planning system weighs not just on the building sector but on the entire economy, driving up energy prices, undermining business investment and crippling our ambitions for science and AI. Why invest somewhere if you can’t build?

There is no money without growth. There is no growth without building. There is no building without planning for reform.

Beyond the words, what was remarkable was that the speech was accompanied by immediate action. The government called for the review of two previously rejected data centre planning applications – one presumably to allow them to expand. And with a few strokes of the pen, the government destroyed the previous regime’s effective ban on onshore wind, potentially the first step towards an energy-abundance strategy.

Imagine, if you will, what it would be like under Whitehall modus operandi. A Green Paper, a White Paper, maybe a technical consultation or two, a lot of quibbling about the views of ‘stakeholders’, and then – a year or two later – a few carefully nuanced amendments to the regulations that changed the status quo by a few per cent. The Chancellor’s speech was a rejection of incrementalism in favour of action.

Something will happen that hasn’t happened in a long time. The government will wake up and discover that it is strong.

In addition to planning reform, the emphasis on macroeconomic stability and fiscal responsibility is rightly designed to reassure bond markets. And her commitment to pension reform “to drive investment in domestic businesses and deliver higher returns to retirement savers” echoes the recommendations in the Policy Exchange report, Capital releaseand is a welcome recognition of the fundamental role of the financial sector in driving economic growth.

None of this will be easy. Reeves has addressed tough choices three times, and personal interests twice. She will encounter them in abundance—and she will need both steely determination and absolute clarity of purpose to overcome them.

She will have to overcome obstacles within the Labour Party too. To what extent is Reeves’ laser-focus on growth divided among her backbenches? Will Labour MPs who recently triumphed in the green counties share her enthusiasm for paving over the green belt? Even among her cabinet colleagues, how will Angela Rayner’s ambitions to extend workers’ rights, strengthen the power of trade unions and introduce sectoral collective bargaining – the latter of which, according to Policy Exchange’s calculations, could add an average £225 a year to council tax if implemented on social care alone – contribute to the Chancellor’s growth agenda?

But overall, there is reason to be optimistic. This was a serious speech, addressing the most significant obstacles to growth in the UK today – with a clear roadmap for how to overcome them. The Chancellor has set herself a proper mission: now she must deliver.

Iain Mansfield is Research Director at Policy Exchange