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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Chancellor Rachel Reeves’ change of tone on growth has been long in coming. The Labour government’s repeated emphasis since coming to power on its lousy inheritance from 14 years of Conservative rule — though correct — has damaged business and consumer confidence, and made its own task even harder. The UK chancellor has at last begun to construct a more positive and forward-looking narrative. Yet this is a government that still faces two ways on growth. It vaunts its commitment to rekindling the animal spirits of enterprise even as the taxes and regulation it has heaped on to business are impeding the expansion it claims to want.
If the growth quest is to succeed, one priority must be to demonstrate a joined-up approach across government. Reeves’ statements that economic expansion is the sine qua non of Labour’s entire agenda often seem aimed at convincing fellow ministers as much as the country at large. Prime minister Sir Keir Starmer’s pledge to “hard wire” growth into cabinet decisions, by requiring “growth credentials” to be set out in policy consultations, is positive. But parts of the cabinet’s programme — notably its overcooked employment rights bill — still work against its supposedly overriding priority.
The government needs to ensure, too, that its enthusiasm for grand projects that may take decades to bear fruit is matched by a zeal to sweep away the constraints on more immediate investment across the economy. Committing to major developments such as the Oxford-Cambridge “growth corridor” and a third runway at Heathrow — provided they are delivered — is important as a way of driving long-term GDP growth. It sends a useful message to overseas investors that Britain remains ambitious and open to business. Business groups are clear that well-planned infrastructure developments create jobs and lasting economic gains.
Yet what many companies, especially small and mid-sized businesses that account for half of all private-sector turnover, are interested in above all is faster progress on deregulation, such as easing planning controls on everything from housing to wind farms.
After the government ousted the chair of its competition watchdog last week, they want to hear quickly how it plans to strike the elusive balance between a lighter-touch regulatory approach and opening up the risks of abusive corporate behaviour or financial failures. A truly smart approach here could create a competitive advantage over the sclerotic EU, which on Wednesday launched its own effort to slash red tape in the face of Donald Trump’s deregulation drive in the US.
Above all, however, Labour needs to correct its own mistakes — and lighten the new burdens it heaped on to business by placing the brunt of the £40bn tax increase in its October Budget on to employers and imposing onerous worker rights rules. The government is unlikely to row back on its headline increase in payroll taxes, though it should look again at how inheritance tax changes will hit family businesses. That leaves the employment rights bill as the area most ripe for concessions. Labour must address business concerns over the way it plans to grant day-one protections against unfair dismissal, broaden the rights of those on zero-hour contracts and hand more powers to unions in the workplace.
There are other areas where more boldness is needed. Labour should rethink the red lines that are hemming in its ability to conclude the ambitious new deal it says it wants with the EU. But if its commitment to its overriding priority is genuine, Labour’s biggest task is to heed what the enterprises that can deliver growth say they need.
