Chancellor Rachel Reeves has well and truly hit the ground running less than a month since the general election. The King’s Speech has put in motion Labour’s flagship economic policies which are going to transform Britain, for better or for worse.
It would be hyperbolic to suggest there is going to be a paradigm shift in economic thinking, but the Mariana Mazzucato disciples are in charge, and the free marketeers, if there were any left in 10 and 11 Downing Street, are out.
It means we are going to see government led by five missions: economic growth, making Britain a clean energy superpower, taking back our streets, breaking down barriers to opportunity and building an NHS fit for the future.
All these missions are to be underpinned by a new partnership model, one between the state and business which believes the Government must drive and incentivise the private sector to achieve state-set goals and industrial strategies. Although some of Labour’s missions fall short of of pure Mazzucatoism, it is clear a new economic dogma is driving policy making.
Mission-led government is only part of Labour’s policy agenda. Bolted to these missions, in particular the Government’s ‘economic growth’ and ‘clean energy’ mission, are a multitude of state organisations which are to be established on a statutory footing as laid out in the King’s Speech. These are GB Energy (GBE), The National Wealth Fund (NWF) and GB Rail (GBR).
While much of the debate on the Right has consisted of ‘postmortems’ and wrangling over the causes of electoral defeat, what is not being discussed is how Labour’s economic agenda will likely last a generation, just as the state institutions established under Clement Attlee did. This will be a consequential government and we may be waiting some time to dismantle its economic rigging. Should the Conservatives fail to re-embrace free market liberalism, it could mark the beginning of a new period of economic consensus with the same permanence as the post-war period.
Make no mistake, the business-friendly platitudes have made the pill easier to swallow, but Reeves and Labour are at it again, Hugh Dalton style. What they are building is an economic system dominated by bureaucratic agencies which will burrow themselves into the British economic and political apparatus like ticks and could take great time and effort to repeal.
It took over 40 years to privatise the National Coal Board and British Steel. British Rail, the state-owned company that operated most rail transport in Great Britain, lasted from 1948 to 1997. The NHS is, of course, still with us. The parallels are clear, the state is back in the business of managing key sectors as they tried and failed to do in the mid-20th century. The three letter acronyms are back in charge, not competition, deregulation, innovation, or business.
Its not just transport and energy being captured by state bodies, the NWF is also being established to drive much of the Government’s economic partnership with business.
As commentators have already pointed out, Labour’s NWF is not a sovereign wealth fund, as the name implies. The National Wealth Fund Taskforce admit this in their interim report, saying the NWF should be ‘understood as a sovereign-backed green catalytic fund rather than a sovereign wealth fund’. The goal of the fund is to invest and mobilise private capital to fund the UK’s transition to a low carbon economy.
Most concerning is that the report says clearly that the NWF will fill funding gaps for green projects not being funded by the private sector. Behind the branding, the NWF looks more like the ill-fated National Enterprise Board. It too was set up by a Labour government in the 1970s and ended up owning shares in failing British companies in an attempt to prop them up. The NWF risks repeating history, as it admits its purpose is to invest in high-risk projects and provide below market rate loans.
Although it is still early days, the Conservative Party in opposition will have to decide whether to tinker around the edges or apply a sledgehammer to Reeves’ alphabet agencies and economic thinking. Will the NWF, GBR, GBE, play a role in the Conservatives’ vision for the future? If they do, a new period of economic groupthink is upon us. If not, we must start to hold Labour and their missions to the fire, and judge them on whether they meet their own, admittedly nebulous, goals.
This will be a consequential government, and the challenge to change the political landscape once Reeves and Starmer have done their work could be much greater than we currently think.
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