A barrage of grim UK economic data this month has given chancellor Rachel Reeves “permission” to pursue a more aggressive growth agenda, according to senior government officials, trampling on Labour sensitivities and putting her on a war footing with regulators.
The chancellor will next week deliver a “growth” speech against the backdrop of a stagnating economy, recent turmoil in the bond markets, and a survey on Friday showing UK businesses cutting jobs at the fastest pace since the financial crash, barring the pandemic.
Reeves, who wants to accelerate a number of flagship investment projects, is said by colleagues to have decided after her recent battering at the hands of the markets and political opponents to go “faster and further” to pursue growth.
“There’s a view in the Treasury that all of this is fine,” said one minister. “It is seen as permission for them to go harder on growth measures.”
An ally of the chancellor said: “She has been frustrated by the speed at which things have been happening. She wants to use the power of the Treasury to show where we want to go next. This is politically contentious stuff.”
For example Reeves, who attracted Conservative criticism for visiting Beijing this month, is pushing for fast-fashion company Shein to list in London, in spite of concerns about standards in its factories in China. She is also supporting an expansion of Heathrow airport.
Market turmoil at the start of the year led to claims that Reeves’ job was on the line, but her supporters say she has used the episode to respond with “strength and decisiveness”. She said this month she would be happy to be known as “the Iron Chancellor”.
The Conservatives, however, say this is laughable. “It is clear Labour are out of their depth and out of ideas to get the economy growing,” said Andrew Griffith, shadow business secretary. “Working people are paying the price for Labour’s war on business.”
Griffith notes that for all Reeves’ deregulatory talk, she is about to impose on companies a raft of new employment laws, which the government estimates will cost business £5bn.
But Reeves — who this week was talking up the British economy at the World Economic Forum — has shown in recent days a willingness to use the power of her office to take decisive action across Whitehall, some of which is privately applauded by the Tories.
Ministers this week ousted Marcus Bokkerink as chair of the Competition and Markets Authority, the monopolies regulator that has been criticised for allegedly hobbling growth.
His departure was a signal to other regulators they must push harder on growth, according to Treasury officials. “Sometimes a message has to be sent,” said one.
Reeves’ focus on spurring on regulators has received the private admiration of the opposition. “We should have done this ourselves,” said one former Tory Treasury minister.
Yet while some Tories privately approve, Reeves’ actions have ruffled some on her side of the aisle. She has been accused by former shadow chancellor John McDonnell of leaving the door open for critics to say Labour was “defending corporate abuse and profiteers”. Another senior leftwing Labour MP said: “It’s desperate.” She appears, however, to be comfortable making such enemies.
The chancellor also sided with the banks this week in a Supreme Court case that will determine whether they have to pay out potentially tens of billions of pounds in redress in a motor finance mis-selling case. A new non-dom tax regime has been loosened.
Next week, Reeves is also expected to signal her backing for airport expansion in the south-east, including Heathrow, in spite of fierce criticism from the green lobby and London mayor Sir Sadiq Khan.
Whitehall insiders believe Reeves leaked the move to bounce her cabinet colleagues; Starmer himself has previously voted against a third runway at Heathrow, while Ed Miliband — who threatened to resign from Gordon Brown’s government over the issue — this week played down any suggestion he would quit. Meanwhile judicial reviews of contentious infrastructure projects will be curtailed.
Given the threat posed to her precarious fiscal plan by sluggish growth, Reeves has told the Treasury to stop focusing on Budgets and concentrate on boosting investment instead.
Officials are working on a range of projects — some with fruit-related code names — to get investment into Britain.
One relates to a massive new Universal theme park being proposed for a site near Bedford, with officials close to talks between the company and Treasury saying that they are “progressing well”.
Backers of the project claim it could generate as much as £50bn in economic value in its first 20 years. The Treasury has been asked to provide financial support, including for the upgrading of an M1 motorway junction and the building of a new station.
One official briefed on the talks, dubbed Project Mandarin, said they were nearly complete: “It’s one of those negotiations you could conclude if you wanted to.” Another person briefed on the talks added: “It’s very close. It’s almost there, but not there yet.”
Officials said the package of support focused mainly on guaranteeing infrastructure investments and improvements, which will be critical to carrying the thousands of people travelling to visit the 500 acre site.
Executives at Comcast — whose Universal Destinations & Experiences is behind the scheme — have in the past told the FT that they wanted to build “one of the greatest theme parks in the world”.
Universal Destinations & Experiences said: “We continue to have productive discussions with the UK government.”
Alongside the theme park, Reeves is also trying to finalise negotiations with AstraZeneca to revive a stalled vaccine manufacturing site in Speke, Merseyside.
The project was paused after the Treasury sought to reduce the amount of state support provided to the British pharmaceutical company’s vaccine centre, cutting a pledge made by the last Conservative administration from about £90mn to £40mn.
Meanwhile Reeves is also expected to signal her support for a £9bn highway and tunnel across the river Thames in east London, which would use private finance to defray the cost to taxpayers.
There are also signs that the government hopes to avoid any criticism that it is focusing all its firepower on the south east of England.
The Treasury has announced plans to review the “green book” it uses to evaluate the value of proposed investment decisions, long the focus of ire from critics who believe it favours London and the surrounding region.
It has also promised to build a pipeline of investable projects outside of the south east, with the help of the Office for Investment. Reeves is being watched closely by northern mayors, who had been courted by the Labour government when it first took office.
