A new approach. Rachel Reeves outlined Labour’s new approach to economic policy in her speech to the Labour Party Conference this week. (Video here.) The Shadow Chancellor focused on rebuilding the ‘everyday economy’ as a solution to the deep pre-pandemic problems of the UK economy, which she identified as falling growth rates, flatlining productivity, a plummeting trade balance, widening regional and other inequalities, and stalling pay growth.
“The first green chancellor”. Reeves announced a decade-long investment programme of £28bn per year in the “green transition”. This would “invest in good jobs in the green industries of the future: 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; keeping homes warm and getting energy bills down; good new jobs in communities throughout Britain.“ She didn’t, however, refer to this as a “Green New Deal”, despite the resolution in favour of a Green New Deal passed by the conference and Ed Miliband’s committed support in his conference speech (“this is the cause I came back to fight for.”)
Taxation and fiscal policy. Reeves made a series of announcements on taxation. She pledged to end the tax benefits of charitable status enjoyed by private schools, with the £1.7bn a year saved going to state schools. She promised to abolish business rates, replacing them with a new - but as yet unspecified - system putting online businesses on the same tax footing as high street retailers. (She singled out Amazon as a key target: “If you can afford to fly to the moon you can pay your taxes here on earth.”) She said Labour would review all tax reliefs and abolish those that do not “deliver for the economy or the taxpayer.” And she almost-but-not-quite committed to equalising the tax rates on income from wealth - particularly dividends and capital gains - and income from work, a longstanding reform proposal. (Might this be filled out in Keir Starmer’s speech on Wednesday?)
Insourcing. In her speech Reeves targeted the Government’s over-reliance on outsourcing (citing companies like Serco) in its response to the pandemic. She promised that a Labour Government would institute “the biggest wave of insourcing in a generation” to reduce wasteful public spending and bring public contracts and services back into the public sector. The Institute for Government shows how insourcing of public services “can improve quality, increase reliability, and save money” and lays out guidelines for when and how public services should be brought back into government hands.
Progressive procurement. Reeves emphasised Labour’s previously announced plan to “make, buy and sell more in Britain”, through which it aims to award more public contracts to British businesses and support the ‘onshoring’ of manufacturing capacity.
Employment rights and collective bargaining. Earlier in the Conference, Deputy Leader Angela Rayner and then shadow minister Andy McDonald published a Green Paper on Employment Rights, setting out more detail on their ‘New Deal for Working People’. The centrepiece is a commitment to ‘fair pay agreements’ in key sectors. These would set out national pay rates and working conditions and would be achieved through sectoral collective bargaining. Among the other key elements of the Green Paper are:
Financial crisis in China? Economist Adam Tooze produced an explainer of the Evergrande crisis in China, collating various links to explore how the “Lehman-style implosion” could be “another test of “Keynesianism with Chinese characteristics”.
The EU’s fiscal rules. Economist Joseph Stiglitz calls for a “new, more flexible and more thoughtful approach to macroeconomic and fiscal management” in an article for the FT to promote Fiscal Matters’ week of debate on fiscal rules.
Should the MPC tighten monetary policy? Oxford economist Simon Wren-Lewis explains why “monetary tightening is a bad idea” in the current recovery phase because “inflationary shocks hitting the economy are temporary”.
The renaissance of industrial policy. Economists Mariana Mazzucato, Rainer Kattel and Josh Ryan-Collins from the UCL Institute for Innovation and Public Policy have explained in the Boston Review why there is an international shift in economic policy which embraces an active role for government in spurring growth and innovation.
Resilient supply chains. A new briefing from the White House on “Preventing and Addressing Supply Chain Disruptions” describes the Biden Administration’s strategy to create an economy more resilient to shortages in strategic industries like computer chips.
Job creation where it is most needed. Bloomberg’s Lizzy Burden covers IPPR’s call to ‘boost it like Biden’ and invest in skills and transport to tackle the jobs crisis. Analysis from IPPR suggests that there is “more slack in the labour market than official estimates show” and raising public investment to 5% of GDP will create more jobs in the middle of the pay spectrum.
A just transition for heavy industry. Ed Miliband proposed a 10 year £3bn plan to help the UK steel industry transition to net zero which drew heavily from IPPR North’s report on the future of Northern steel and recommendations from IPPR’s Environmental Justice Commission.
Public-common partnerships. Common Wealth published a report on Public-Common Partnerships (PCPs), a model for councils and other public bodies to work with communities to design, manage and expand public and common resources.
Berlin votes to socialise housing. Berliners have voted in a referendum for Berlin’s city government to expropriate apartments owned by corporate landlords with at least 3,000 units. 56% of voters were in agreement. Though the referendum is not binding, the vote has increased pressure on the city government to buy apartments from larger landlords.
Levelling up is impossible without proper devolution. New Local wrote an open letter to Michael Gove arguing that “inequality and centralisation are directly linked. So, levelling up is impossible without proper devolution”.
Community wealth building’s role in the just transition. CLES’s Ellie Radcliffe wrote a briefing for LGC Plus explaining how local authorities can use community wealth building practices to further social, economic and environmental justice.
Proportional Property Tax. A report from WPI Economics found that replacing council tax with a Proportional Property Tax and abolishing stamp duty could release 600,000 homes onto the market and rebalance regional inequality. The Fairer Share campaign summarised the report in a short twitter thread.