This post was written by our Director of Programmes and Campaigns, Nick Bryer.
The atmosphere of the Labour party conference wasn’t as celebratory as you might expect for a party that has just returned to government after 14 long years in opposition. But nor was there as much doom and gloom as we might have expected after a summer of dire messages about the state of Britain, and a week of bad headlines about donations and in-fighting in the run-up. Coming away from it, how should we all be feeling? Is there cause for optimism?
Well, I think it’s too soon to say. The government are rightly proud of some of the things that they’ve achieved in their first couple of months – most notably perhaps from Ed Miliband’s Department for Energy & Net Zero. But some of their biggest announcements – the National Wealth Fund and GB Energy for example – still lack a lot of detail. They could turn out to be transformative if they’re given the time, investment and political backing to really scale up, or a bit of an irrelevance if not. Similarly, the government has announced a welcome review of our broken pensions system – but so far, the level of ambition is unclear. Will they grasp the opportunity to make the system work better for savers and pensioners, but also to turbocharge investment in the green economy? Rachel Reeves tells us that ‘growth is the challenge, and investment is the solution’. But does she have a plan for where that investment is going to come from, or where it’s going to go?
Next month, we’ll get Rachel Reeves’ first budget, and the outlines of the promised Green Industrial Strategy (notably, Reeves in her speech didn’t refer to it as ‘green’ – though other ministers are still using the phrase). Some will remember that Theresa May was also going to have an industrial strategy – and that went nowhere, in part because of a lack of backing from the Treasury. The ability of a government to bring an industrial strategy to life depends on which policy levers they’re prepared to pull and what investment they can mobilise to back it with. We might expect that a Labour government will be prepared to pull more or different levers than a Tory one – but without more clarity on their vision and approach, it’s hard to say.
In her speech, Reeves hinted that there will be some tweaks to the ‘fiscal rules’ to allow greater long-term investment. These would be welcome changes which could lead to a much-needed increase in public investment.
It’s not going to be anything like enough for them to hit their ambitious goals for economic growth, clean energy and more though. For that, they’re very much relying on rallying investment from the private sector.
Big businesses were very visible at Conference, and the government were at pains to stress their commitment to working in partnership with them – creating an ‘enabling environment’ and removing obstacles to investment (which seems to mostly mean reforming planning rules). I heard less about their plans to support small and medium enterprises (SMEs), and ensuring that they have access to the financial backing that they need to grow and thrive. Maybe when we see the outlines of their industrial strategy it will become clearer what their priorities are for investment, how they will incentivise investors to back those priorities, and how they will make sure that the benefits of any resulting growth are widely shared. But at the moment, it feels like they are extremely reluctant to do anything which might scare the horses. The message seems to be that any investment is good investment, and the government will be grateful for whatever comes – wherever it goes, and on whatever terms. I heard one member of the government say that they’ll be looking at how to crowd more private investment into the water sector – with no reference to the fact that handing over our water system to private investors, without sufficient regulation or guardrails in place, has quite spectacularly failed to deliver the investment that is so desperately needed in our water infrastructure, leading to high bills and sewage filled rivers.
The review of the pensions system is a key opportunity to mobilise the exact kind of stable, long-term investment that we need. Our private pensions market in the UK is enormous, with £3 trillion pounds of assets, but it’s currently failing to deliver for savers and pensioners, for the wider economy, or for the environment. It was notable at Conference that pensions were mentioned as a key part of the equation in most of the events I went to which were focused on financing a rapid and just transition to a low-carbon economy. But energy and the climate weren’t mentioned at all (until we asked the question) in events that were focused on pensions reform and how that could support the UK’s economic growth. This seems like a strange disconnect. Every part of government is supposed to be thinking about how they can contribute to the ‘5 Missions’ – one of which is to have clean energy by 2030 – and it seems a no-brainer that a major review of one of the biggest parts of the financial system should therefore be including that as a priority goal. But, again, the government line seems to be that they don’t want to be seen to be telling investors where they should and shouldn’t be spending their money. It’s hard to see how that level of timidity will square with an ambitious industrial strategy.
Undoubtedly, Labour have come into power under very challenging financial and economic circumstances. Caution is understandable, but it also risks being fatal. The spectre of Reform reared its head a few times during the Conference, with others referencing the lesson of Germany where a progressive government has failed to deliver on its promises and now faces surging support for the far right. Ambitious action to deliver lower bills, better jobs, cleaner air and water, and functional public services will be the best antidote to that.