Macroeconomic Policy

Labour's economic programme

“A Fairer, Greener Future”. If there is one economic message Labour wanted people to take away from their party conference in Liverpool, it is that their plan for growth is a green industrial strategy. The Shadow Chancellor, Rachel Reeves, and later the Labour leader, Keir Starmer, used their conference speeches to outline an alternative to Liz Truss’ “trickle-down” vision for growth which Starmer says has “lost control of the economy” and “crashed the pound”. In launching a “Green Prosperity Plan”, Starmer regularly linked growth to the climate, outlining a future in which people look at Labour as the party that “built a fairer, greener, more dynamic Britain by tackling the climate emergency head on and used it to create the jobs, the industries, the opportunities of the future”. The word “mission” was used several times to describe the proposed Green Prosperity Plan, echoing Mariana Mazzucato’s language of a “mission economy” in which productivity, industrial strategy and strong economies are built by a state focus on country-wide missions. In this case, the mission is tackling the climate crisis, with Labour’s 2022 strategy putting meat on the bones of Rachel Reeve’s £28 billion climate pledge last year.

  • National wealth fund. In plans outlined on Monday, Rachel Reeves announced that in Government, Labour would introduce a National Wealth Fund for green investment, inspired by the sovereign wealth funds of the likes of Norway and France. The fund would allow the state to retain a share in the renewable assets in which it invests. The £8 billion fund acts as Labour’s answer to levelling up, with £2 billion earmarked for eight new ‘gigafactories’ in the West Midlands, the North East, the North, West and the South West. A further £3 billion would be spent on six new clean steel plants Cardiff, Rotherham, Sheffield, Port Talbot and Scunthorpe. £1 billion of the fund is set aside to create “net-zero industrial clusters” in Grangemouth, South Wales, Humberside, Teesside, Merseyside, Southampton and the Peak District. Both Reeves and Starmer stressed the role of the private sector, with Starmer saying that Labour would “make sure” that public spending would spur on private investment. The New Statesman’s Freddie Hayward argues that the problem with the national wealth fund, along with Labour’s other big commitments, is that the economy is in a very different place to what it was back when Reeves began writing her speech in July.
  • Great British Energy. One of the most significant announcements was saved for Starmer’s speech on Tuesday: the establishment of a publicly owned Great British Energy company within Labour’s first year. Starmer said that GB Energy would be “right for jobs…right for growth…right for energy independence from tyrants like Putin”. The plan does not involve nationalising any existing companies. Instead, GB Energy would enter the market as an energy producer that would compete with private firms. Though operationally independent, GB Energy would have a mandate to invest in clean energy, which it could do individually or in partnership with the private sector. Labour hopes that GB Energy would be able to make riskier investments, such as new tidal technology or modular reactors, that the private sector may often “shy away from”. Public ownership campaigners We Own It welcomed the move as “a hugely important first step” towards a shift in energy ownership. Common Wealth’s Mat Lawrence said that public ownership of energy was “superior and more affordable” due to the state’s ability to invest in clean energy technology at lower rates and the fact that it would not have to consider shareholder interests. 
  • 2030 clean energy target. Labour’s proposed industrial strategy is underpinned by a mission to reach 100% clean energy by 2030, giving the party less than six years to achieve this mission should it come to power at the next general election in 2024. Targets include doubling the UK’s onshore wind capacity, trebling solar power, quadrupling offshore wind, investment in tidal, hydrogen, nuclear, carbon capture and the insulation of 19 million homes. Starmer hailed the mission, which would start within 100 days of governing, as “the biggest partnership between government, business and communities this country has ever seen”.  Right wing commentators have criticised the plans as hypocritical for still using fossil fuels as Labour have said that it would “maintain … a strategic reserve of backup gas power” if renewable resources were scarce. However, Carbon Brief’s Simon Evans argues that it is perfectly possible for the UK to rely 100% on clean energy, “even during so-called “kalte dunkelflaute” with cold weather and little wind or sun”.
  • What business wants. Labour’s plans involve significant state intervention in the economy, but Labour insist they are more in tune with business opinion than the government. Rachel Reeves argued: “When I talk to businesses, they don’t tell me that their priority is corporation tax”. Likewise, “don’t be fooled into thinking they buy into the Tory trickle-down fantasy”, said Starmer. Instead, Labour affirmed its commitment to replacing business rates with a “fairer system”. While many welcomed the proposals, some businesses criticised the proposals as “woolly” and expressed concerns that business rates could be replaced with a Land Value Tax. 

Public services. Starmer focused on public services for much of his speech, saying that “Strong public services are the foundation of a successful economy– always”. Labour have rejected a narrative that spending on public services must be balanced with helping the economy, instead arguing that long NHS waiting lists and expensive childcare are some of the factors undermining economic performance. However, Starmer also warned that while he “would love to stand here and say Labour will fix everything”, the “damage [the Conservatives] have done” will mean that “the rescue will be harder than ever”. 

Equality and work. The government’s new economic strategy also opened the space for Labour to make a more philosophical argument about the relationship between equality and prosperity, with Starmer saying that “Britain won’t be better off just because we make the rich, richer”. Inequality and low pay were central to Starmer’s critique of Britain’s low growth, arguing that insecure, low-paid work and public services that can’t support people make for “weak” economic foundations for growing an economy. 

  • Pay. Rachel Reeves announced that Labour would introduce a “genuine Living Wage” that “reflects the real cost of living”, though what this figure would exactly be is so far unclear. The announcement comes as the Living Wage Foundation, supported by Resolution Foundation research, raised its living wage by the largest margin since it was established to £10.90 an hour (£11.95 in London). The TUC has previously called for a £15 minimum wage.
  • Industrial relations. Rachel Reeves announced that if elected, she would “bring together a National Economic Council that will bring together industry and trade unions, so working people and businesses were at the heart of economic decision-making”. The Guardian’s Larry Elliot described the announcement as “a revival of the tripartite approach pioneered in the early 1960s and scrapped by John Major three decades later”. This comes on the back of a previous set of policies dubbed a ‘New Deal for Working People’ including fair pay agreements.
  • Tax. Labour have said they would not reverse the Government’s cut in the basic rate of income tax, but there was a clear message that tax cuts for the rich would not be welcome in a Labour government. On the Government’s recent cut in the top rate of tax, Starmer told conference: “Don’t Forgive. Don’t Forget”. He also suggested that corporation tax cuts are not a priority for business. 
  • Home ownership. Starmer pitched Labour as “the party of home ownership in Britain today”, setting a target of 70% home ownership. The Labour leader also stressed that home ownership support will be focused on first time buyers, saying that Labour would introduce a mortgage guarantee scheme. 
Weekly Updates

Macroeconomic policy

Mini-budget fallout. Kwasi Kwarteng’s “mini-budget” last week has been followed by significant political and economic upheaval, leading some to ask if Britain is “now in a full-blown economic crisis?” and Scottish First Minister Nicola Sturgeon arguing that this could be worse than the 2008 financial crisis. In a dramatic move on Wednesday, the Bank of England was “forced into emergency action”, reversing its quantitative tightening policy, as it announced that it would set aside £65 billion over coming days “to ease pressure on pension funds and insurance companies”. New Economy Brief will cover this ongoing situation in more detail in our Digest next week.


Colonialism and debt. Debt Justice has launched a new project exploring the link between colonialism and debt, arguing that “the global economy is shaped by a history of exploitation”. With a new set of resources, Debt Justice aims to improve understanding of the colonial history behind debt in several Global South countries. 

Childcare guarantee. Ahead of Labour Party conference and announcements on childcare from Shadow Education Secretary Bridget Phillipson, the IPPR published a plan for a "childcare guarantee".  Recommendations include expanding the Government's core free hours offer to 30 hours per week for all three- and four-year-olds, throughout the year (including school holidays) and the introduction of an "Affordable Hours Scheme covering 60 or 95 per cent of costs for additional hours of care, depending on household income". 


Scrapping habitat protections. Government plans to scrap habitat protections are “madness”, says former Prime Minister Boris Johnson’s father and former MEP, Stanley Johnson. The Chancellor, Kwasi kwarteng, used his mini-budget to announce 38 “investment zones” where planning restrictions, which affect habitat protections will be lifted, causing conservation groups to brand the move an “attack on nature”.