A flurry of gloomy UK economic data this month has given chancellor Rachel Reeves “permission” to pursue a more aggressive growth agenda, according to senior government officials, offending Labor’s sensibilities and putting her in a position of war with regulators.
The chancellor next week will deliver a “growth” speech against a backdrop of a stagnating economy, recent turmoil in bond markets and a survey on Friday showing UK businesses are cutting jobs at the fastest pace since from the financial crisis, excluding the pandemic.
Reeves, who wants to accelerate a number of major investment projects, is said by colleagues to have decided after her latest blow at the hands of markets and political opponents to go “faster and further” to pursue growth.
“There is a view in the Treasury that this is all fine,” said one minister. “This is seen as permission for them to go harder on growth measures.”
An ally of the chancellor said: “She has been frustrated by the speed with which things have happened. She wants to use the power of the Treasury to show where we want to go next. These are politically controversial things.”
For example, Reeves, who drew Tory criticism for visiting Beijing this month, is pushing for fast fashion company Shein to list in London despite concerns about standards at its factories in China. It is also supporting an expansion of Heathrow Airport.
Market turmoil earlier in the year led to claims that Reeves’ job was on the line, but her supporters say she has used the episode to respond with “strength and determination”. She said this month that she would be happy to be known as the “Iron Chancellor”.
However, conservatives say this is laughable. “It is clear that Labor is out of its depth and out of ideas to grow the economy,” said Andrew Griffith, shadow business secretary. “Working people are paying the price for Labour’s war on business.”
Griffith notes that for all Reeves’ talk of deregulation, she will impose a raft of new employment laws on companies, which the government estimates will cost business £5bn.
But Reeves – who was this week speaking on the British economy at the World Economic Forum – has shown in recent days a willingness to use the power of her office to take decisive action across Whitehall, some of which have been privately applauded by the conservatives.
Ministers this week sacked Marcus Bokkerink as chairman of the Competition and Markets Authority, the monopoly regulator that has been criticized for allegedly stifling growth.
His departure was a signal to other regulators that they should push harder for growth, according to Treasury officials. “Sometimes a message has to be sent,” said one.
Reeves’ focus on prodding regulators has won the private admiration of the opposition. “We should have done it ourselves,” said one former Tory Treasury minister.
Still, while some conservatives privately approve, Reeves’ actions have shocked some on her side of the aisle. She has been accused by former shadow chancellor John McDonnell of leaving the door open for critics to say Labor was “protecting corporate abuse and profiteers”. Another left-wing Labor MP said: “It’s desperate.” However, she seems to be comfortable making such enemies.
The chancellor also sided with the banks this week in a High Court case that will determine whether they have to pay potentially tens of billions of pounds in damages in a motor finance mis-selling case. A new non-significant tax regime has been released.
Next week, Reeves is also expected to signal her support for airport expansion in the south east, including Heathrow, despite fierce criticism from the green lobby and London mayor Sir Sadiq Khan.
Whitehall insiders believe Reeves leaked the move to jump her cabinet colleagues; Starmer himself has previously voted against a third runway at Heathrow, while Ed Miliband – who threatened to resign from Gordon Brown’s government over the issue – this week dismissed any suggestion he would walk away. Meanwhile, judicial review of controversial infrastructure projects will be limited.
Given the threat posed to her precarious fiscal plan by slow growth, Reeves has told the Treasury to stop focusing on budgets and focus on boosting investment.
Officials are working on a number of projects – some with code names linked to the fruit – to invest in Britain.
One relates to a massive new Universal theme park being proposed for a site near Bedford, with officials close to talks between the company and the Treasury saying they are “progressing well”.
Backers of the project claim it could generate up to £50 billion in economic value in the first 20 years. The Treasury has been asked to provide financial support, including upgrading an M1 motorway junction and building a new station.
An official briefed on the talks, called Project Mandarin, said they were almost over: “It’s one of those negotiations that you can end if you want to.” Another person briefed on the talks added: “It’s very close. It’s almost there, but it’s not there yet.”
Officials said the support package focused mainly on ensuring investment and infrastructure improvements, which will be critical for transporting the thousands of people who travel to visit the 500-hectare site.
Executives at Comcast – whose Universal Destinations and Experiences is behind the scheme – have previously told the FT that they wanted to build “one of the biggest theme parks in the world”.
Universal Destinations & Experiences said: “We continue to have productive discussions with the UK government.”
Alongside the theme park, Reeves is also trying to finalize negotiations with AstraZeneca to revive a stalled vaccine manufacturing site in Speke, Merseyside.
The project was scrapped after the Treasury tried to reduce the amount of state support provided to the British pharmaceutical company’s vaccine centre, cutting a pledge made by the last Tory administration from around £90m to £40m.
Meanwhile Reeves is also expected to signal her support for a £9bn motorway and tunnel across the River Thames in east London, which would use private finance to pay the cost to taxpayers.
There are also signs that the government hopes to avoid any criticism that it is focusing all its firepower on the south-east of England.
The Treasury has announced plans to overhaul the “green book” it uses to assess the value of proposed investment decisions, long the focus of anger from critics who believe it favors London and the surrounding region.
It has also promised to build a pipeline of investable projects outside the Southeast, with the help of the Investment Office. Reeves is being watched closely by northern mayors who were sidelined by the Labor government when it first took office.
