Reeves criticises New Labour mistakes as she backs Hunt’s inflation plan
New Labour did not do enough to help normal workers or control businesses, Rachel Reeves suggested as she laid out her vision for Britain’s economy.
The shadow Chancellor claimed that a failure to boost growth in the UK would help the far right and left if “mainstream politics cannot offer the answers to our predicament”.
But she moved to reassure businesses that she will continue to put economic stability first, pledging to keep Jeremy Hunt’s policies on inflation and the public finances in a bid to combat Conservative claims that Labour cannot be trusted.
Delivering the annual Mais lecture at City, University of London on Tuesday evening, Ms Reeves promised that if she takes over at the Treasury after the general election she will bring officials working on economic growth into the process of drawing up Budgets, in the face of criticism of the department’s focus on balancing the books.
She heaped praise on the achievements of the last Labour government, but added: “The analysis on which it built was too narrow. Stability was a necessary, but not a sufficient condition to generate private sector investment.
“An underregulated financial sector could generate immense wealth but posed profound structural risks too. And globalisation and new technologies could widen as well as diminish inequality, disempower people as much as liberate them, displace as well as create good work.”
There was “too much insecurity” under Tony Blair and Gordon Brown, Ms Reeves warned, adding: “Despite sustained efforts to address our key weaknesses on productivity and regional inequality, they persisted, and so too did the festering gap between large parts of the country and Westminster politics.”
The shadow Chancellor confirmed that she would not change the Bank of England’s current target of holding inflation at 2 per cent, and doubled down on “the pressing need to rebuild the UK’s public finances, to increase our space to respond to future shocks”.
She said she would write fiscal rules forcing the Treasury to bring down the size of the national debt within five years into law, saying: “I will end the practice of the Chancellor being able to scrap the rules at any time, with an escape clause that would only suspend the rules if the OBR declared that the UK was in an economic crisis.”
But she also promised to restore a requirement, binned by Mr Hunt, for the Bank of England to consider the need to tackle climate change when making decisions.
Instead of boosting funding for services in the short term, Ms Reeves pledged to become more interventionist, working with businesses to help key industries expand.
She said: “Governments and policymakers are recognising that it is no longer enough, if it ever was, for the state to simply get out of the way, to leave markets to their own devices and correct the occasional negative externality.”
And defending her focus on economic growth as the main goal of a Labour government, the shadow Chancellor warned: “The stakes have rarely been higher. Not only for the living standards of working people; not only for Britain’s competitiveness in a fast-changing world – though both are at stake. But also for the health of our democracy.”
She blamed “the rise of populists who offer not answers but recriminations” on the failure of politicians to boost voters’ living standards.
The trade union Unite, one of Labour’s biggest funders, hit out at Ms Reeves.
General secretary Sharon Graham said: “Labour needs to be focused on delivering good jobs, public services and dignity in retirement, not more rhetoric about abstract economic concepts, like GDP growth.”
