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Yesterday I covered quite a lot of comment on the Rachel Reeves’ Mais lecture based on a three-page press release sent out by Labour with advance extracts. The full speech runs to 8,000 words and it is certainly worth a read. Here is some commentary published after the full text was made public.
Paul Mason, the former economics journalist who is now an active Labour supporter, says in a blog for the Spectator that Reeves is proposing an approach that should make it easier for the government to justify capital investment. He explains:
Reeves effectively offered markets a trade-off. She set out the same broad fiscal rule as the government: debt falling at the end of five years and a deficit moving towards primary balance. She will make it law that any fiscal decision by government will be subject to an independent forecast of its effects by the OBR. But, she said: “I will also ask the OBR to report on the long-term impact of capital spending decisions. And as Chancellor I will report on wider measures of public sector assets and liabilities at fiscal events, showing how the health of the public balance sheet is bolstered by good investment decisions.”
Why is this so big? Because the OBR does not currently model the ‘long-term impact of capital spending decisions’. It believes that £1 billion of new capital investment produces £1 billion of growth in the first year, tapering to nothing by year five. Furthermore, since 2019 it has repeatedly expressed scepticism that a sustained programme of public investment can produce a permanent uplift in the UK’s output potential.
George Eaton at the New Statesman says the Reeves speech contained Reeves’ “most explicit repudiation yet of the model pursued by Tony Blair and Gordon Brown’s governments”. He says:
In her 8,000-word Mais Lecture, delivered last night at City University, the shadow chancellor offered her most explicit repudiation yet of the model pursued by Tony Blair and Gordon Brown’s governments. Though she praised New Labour’s record on public service investment and poverty reduction, Reeves warned that the project failed to recognise that “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”.
She added that the labour market “remained characterised by too much insecurity” and that “key weaknesses on productivity and regional inequality” persisted. This is not merely an abstract critique – it leads Reeves and Keir Starmer to embrace radically different economic prescriptions.
Mais lecture is the most intellectually wide-ranging speech Rachel Reeves has given. Worth reading for takes on Lawson, austerity, New Labour, link between dynamism & worker-security, and how geo-politics changes our national growth story (& more besides) Continue reading…
http://dlvr.it/T4QN5l