Rachel Reeves: Wealth creation will be the defining mission of the Labour government

The writer is shadow chancellor. To read chancellor Jeremy Hunt’s opinion article, click here

This general election falls at an inflection point for the British economy. The stakes are high, and we must be honest about the situation that any new government will confront. The tax burden at its highest level in 70 years. The national debt at its highest since the 1960s. Our schools, hospitals and prisons in a parlous state, starved of both investment and much-needed reform. Our small and growing companies struggling to access the finance they need to scale up, while successful firms too often choose to list overseas. Ordinary families still feeling the impact of high prices, soaring housing costs and stagnant pay.

At root, these problems are a product of our growth performance. If the UK economy had grown at the OECD average since 2010, it would be £150bn larger today, equivalent to £5,000 per household. That would in turn mean around £55bn in additional tax revenues every year to resource our public services, without the need for tax increases. We are paying the price for a decade of economic failure.

But instead of confronting these causes, the Conservative manifesto offered a wish list of unfunded promises and gimmicks. The manifesto that Labour published is very different. It doesn’t pretend we can turn things around overnight. Ultimately, there is only one way out of the bind the country is in: a return to strong and sustained economic growth. Wealth creation will be the defining mission of the next Labour government. 

Of course, no one can deny the need for an immediate, targeted injection of cash into public services. We are committed to 40,000 additional appointments in the NHS each week and 6,500 new, specialist teachers for our schools. We have set out specific tax changes to do so, including plans to further close the non-dom loophole, crack down on tax avoidance, and end the tax break which exempts private schools from VAT and business rates.  

But in an ongoing cost of living crisis, it would not be right to raise taxes on working people. That is why I have pledged not to raise income tax, national insurance or VAT for the duration of next parliament.  

The lifeblood of growth is business investment. We need a partnership between it and a strategic state

As we were brutally reminded by the consequences of the Conservatives’ mini-Budget, a robust fiscal and monetary framework is non-negotiable, if we are to retain market confidence, keep borrowing costs down, and provide the stability business investment requires. That is why we are so committed to the integrity of our independent economic institutions. It is also why we have committed to cast-iron fiscal rules, to prevent a repeat of recent chaos. Those specify that the current budget must move into balance, so that day-to-day costs are met by revenues, and that debt must be falling as a share of the economy by the fifth year of the forecast.

This differs in an important respect from the Conservative government’s fiscal rules, which include a borrowing rule that does not distinguish between day-to-day-spending and investment. This acts as an incentive to cut the investment needed to leverage private sector capital. I reject that approach, and that is why our borrowing rule targets day-to-day spending within a framework that will see debt falling. That is designed to end the short-termist approach that disregards the importance of public investment, while rebuilding the UK’s public finances, in order to increase our space to respond to future shocks.  

That brings us back to growth. Of course, you might say: it’s all very well to say you want growth. Who doesn’t? The question is, what will you do differently to realise that commitment? 

What we are offering is a different approach; a pro-growth, pro-business agenda that is laser-focused on unlocking investment, removing barriers to enterprise and supporting innovation. Too often in the past few years, politicians have sounded reluctant, even embarrassed, to celebrate the areas in which we really do lead the world, from our financial sector to our universities. With Labour, that will end.

This strategy starts from the recognition that, in our new age of insecurity, we can no longer rely on the old trickle-down, trickle-out methods, nor can we blindly prize flexibility without care for security or openness without resilience. An economic policy centred on broad-based, resilient growth is the only viable strategy.  

Our first priority must be to end the instability which chokes off business investment, not just through fiscal rules but also by ending the political chaos of recent years, and promising tax certainty for business.

Second, the lifeblood of growth is business investment. We need a partnership between a strategic state and business, so that new industries can thrive here and create good jobs from renewable energy, to AI, to life sciences. Partnership for investment will be embodied in new institutions: including a new National Wealth Fund.

Unleashing private investment also means removing institutional barriers. We must do much better at unlocking the trillions of pounds of private sector capital in our pension funds, to support our growing companies and invest in our infrastructure. And we must support the commercialisation of innovation in our world-leading universities by ensuring spinouts have the tools and capital they need to scale up. 

Finally, we need reform. We will reform our politics to push power out of Westminster to the regional leaders who know their area the best, our labour market to make work pay, and our planning system to tear down the obstacles blocking the homes and infrastructure we need.

None of this will be easy. It will require hard work and harder choices. But when I visit businesses and meet working people, I see a country that is richer in potential, more open in spirit and more ambitious for its future than the government which has held it back. We have changed the Labour party. Now we ask for the opportunity to change our country for the better, with a mandate for economic growth — and to do what it takes to realise it.