Why Starmer's growth promise risks falling on deaf ears

Sir Keir Starmer drew on the words of the previous Labor leader to set out his vision for the country in 2021.< /p>

“A fair society will lead to a more prosperous economy,” he said.

“It is not a choice of one or the other, as conservatives would have you believe. We either have both, or we have neither. Harold Wilson once said that the Labor Party is a moral crusade, otherwise it's nothing — he was right.»

Three years later, many on the party's left are wondering whether their leader still believes in that equation . .

Instead of focusing on redistribution, equality and an interventionist state — goals that would surely have been recognized by Wilson in Downing Street more than half a century ago — Starmer has a new mantra: «Growth, growth, growth.»

< p>While the party stands on the threshold of power, thoughts about how to share the fruits of economic expansion take a back seat to the question of whether they can be delivered in the first place.

Labor has made clear it plans to fight the next election on the economy, and — to the fury of unions and activists who say the party has capitulated to «corporate interests» — it is accepting suggestions from bosses on how to achieve this.

Rachel Reeves «understands that the priority is growth,» according to a former Tory donor. Posted by Jordan Pettitt/PA Wire

In private meetings, leaders were brutally honest with shadow chancellor Rachel Reeves and deputy leader Angela Rayner about potential pitfalls.

“The concern is that there is a reductionist approach to economic growth. Focusing on productivity as the sole lens for growth seems old-fashioned. What about access to jobs? We can't define good jobs based on the top 2.5%,” says Allen Simpson, a former Barclays banker who regularly met with Labor as deputy chief executive of trade body UKHospitality.

He has already said Labor that zero-hours contracts can be in the interests of employees and should not be banned, helping to persuade the party to abandon the policies championed by its union donors.

“People like me who have left their home town and moved to another city, their perception of success is not the same as most,” says Simpson.

“Is social justice the same thing as social mobility? No, not in all cases. Even if you make it so that any talented person can become a CEO, someone still has to work for him. The question is how to make the lives of these people more fair. The danger is always to focus too much on social mobility rather than on social justice.”

He was himself a Labor candidate in his home town of Maidstone in 2015 when he took a month off from Barclays to knock on doors. and fight for his seat, Simpson has thought long and hard about where the economic traps might be hidden.

«The debate [currently with Labor] is whether productivity is too reductive a measure of growth,» he says.

“Doing business in a village is much more expensive than in an industrial zone. Fiscal policy in the UK is reducing incentives for society.”

Such talk will intensify in the coming months as the economy increasingly becomes a key battleground between Labor and the Tories and politicians scour the business community for words. wisdom.

This is the right approach: the former Tory donor, who has now decided to fund the Labor Party instead, says he thinks Reeves «gets it» because «she understands that the priority is growth «.

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But what seems most remarkable about the upcoming election so far is how much similarity there is between Labor and the Conservatives' approaches to the economy.

Reeves has the same financial rules as Jeremy Hunt. «This will significantly tie their hands,» says George Moran, an economist at Nomura.

The Labor Party did not oppose Hunt's two national insurance tax cuts announced in the Autumn Statement and Budget, but Reeves sharply criticized Hunt's aim to scrap the tax entirely as an «unfunded liability».

When it comes to In line with his own Labour's tax proposals, it plans to introduce VAT on private school fees and tighten the screws on non-households. Reeves says she won't raise corporate taxes any further.

None of these ideas will generate significant revenue, meaning Labour's focus is likely to be on structural reforms that are more realistic and less costly, Moran says.

Business leaders believe it is Labour's proposals for planning reform that have the party advantage.

Starmer has promised to «tear down» the planning system and build 300,000 homes a year. This goal is exactly the same as the Tories', but there are two key differences from what the Labor Party proposes.

Firstly, Starmer says he wants to develop parts of the green belt, which could potentially open up huge tracts of land.

Secondly, Labor has a much better chance of driving change because its voters are not concentrated in the Nimby heartland in the southeast.

“There is a fairly strong consensus among economists that planning rules are holding back growth. The main obstacle [to reform] was Nimbyism. This is a particular problem for the Conservatives because many of their voters don't want new construction projects going up in their backyards,” says Moran.

Labour will not face the same obstacles as Housing Secretary Michael Gove, whose own efforts were undermined by a parliamentary rebellion that succeeded in securing a promise of steep cuts. housing construction indicators.

Planning reform is not just a question. We're building more homes, but also more infrastructure, says Nick King, managing director of Henham Strategy and a former government adviser.

“Certainly many people I speak to in the development sector are concerned about the government's poor approach in recent months both years and Labor are going to try to get to the bottom of this,” he says.

Last week was crucial for both sides as Rishi Sunak looked to use a series of economic updates to back up his claims that he is turning the economy around .

Although the Bank of England voted to maintain interest rates, official data on Friday confirmed that Britain had emerged from last year's minor technical recession, defined as gross domestic product (GDP) falling for two consecutive quarters.

Reeves wasted no time trying denied the claims, saying earlier this week that the government was «inflaming» the public over the issue. The Tories responded by saying Labor had “no plan.”

Real details about Labor's proposals are still lacking, King says.

Starmer and Reeves fear policy ideas will be cannibalized by the Conservatives, as happened with their proposal to introduce a tax on windfall profits from energy and the abolition of tax breaks for non-residents.

One of the keys is likely to be investment, Moran said. Reeves said her fiscal rules would provide room for borrowing to invest as long as it pays off in the extra growth it generates. That could open the door to increased spending on research and development and infrastructure, Moran says.

It is possible that over time, if the economic situation improves, Labor could revive some form of its abandoned flagship pledge to invest £28 billion a year in clean energy projects.

Starmer abandoned the policy in February , as the sharp rise in borrowing costs on government debt has made borrowing unviable.

“If the economic situation changes, I think they will go back to favoring more green spending. «says Moran.

Everything will depend on lower borrowing costs and financial cushion.»

However, many voters have lost interest in the political confusion between right and left after years of empty promises of economic growth (Liz Truss also promised «growth, growth, growth» during her short tenure as Prime Minister).

James Frain, director of the Policy Research Agency, warned that the Conservatives had for years told the public they had the ability to solve «virtually every problem, from ugly buildings to unhealthy lifestyles to the North-South divide, while magically boosting economic growth.» .

Tired of outlandish promises, the public wants change. A YouGov poll on Thursday showed Labor had secured its biggest lead in the polls since Truss, with the party ahead of the Tories by 30 points.

For businesses, the key difference between the two parties is Labour's continued emphasis on stability.

Reeves argues that after the turmoil of the last few years, «stability is this is change.» The rhetoric and focus on making long-term decisions resonates with businesses, says Nick Faith, director of WPI Strategy, a public relations firm.

But for leaders trying to make friends with Labour, the polls could make a difference. more than politics.

“I think businesses are probably positioning themselves more towards Labor because they have a strong suspicion that Labor will be the next party in power,” says Moran.< /p>

“They want to have a voice in the room, so they're reaching out to them now. It's probably not just that Labor is particularly more business-friendly than the Conservatives.»

However, there are corners of the city where Tory loyalists still whisper their concerns to anyone who will listen to them. listen. . As one investor said at a recent business conference: «It's bad now — wait for the other party to come in.»

Left-wing members of Starmer's party may fear he has abandoned Labour's moral principles. crusade. However, the country as a whole may need more convincing that he won't be dancing to the same old tune.