The unbearable lightness of Rachel Reeves’ economic strategy
Shadow Chancellor Rachel Reeves made what was billed as a keynote speech on Labour’s economic strategy in Bury yesterday. It was supposed, at a high level, to establish Labour’s credentials as party with an intellectually serious and credible economic narrative — reflecting the fact that economic credibility has been Labour’s core problem since 2010, taking in both the Ed Miliband/Ed Balls years and the Corbyn interregnum.
What we got was nothing of the sort. It was a rehash — at a very high level — of the stories that we have heard since 2010: more investment, better education and skills, an industrial strategy. There were fashionable nods to the foundational economy and the green economy. As even Labour-supporting economists have pointed out, it was notably light on detail — it read like a first draft, nothing like a completed strategy (let alone a manifesto).
And, for all the attacks on the wasted Tory years, there was no sense of the “how” — everybody knows that Britain has been blighted by chronic underinvestment for decades, but there was no real suggestion as to how to address the fundamentals in a rentier economy driven by short-termism. If you’re going to talk about “wasted years” you need, at the very least, an analysis of what went wrong, and what you would do differently. There was no method underpinning the aspirations
Most of all, it did not paint a picture of the UK economy as we see it operating in 2022. While little in it was actually wrong — this is ground that has been covered widely since the 2008 crash — it was a speech more notable for what it left out: the cost of living crisis, the supply shock, the growth of rentierism and the fact that there is in the UK a clear crisis of work, in which employment, secure or otherwise, no longer provides the basics of life for a growing proportion of the population.
And of course, apart from a few comments about encouraging public procurement to “buy local” — something that was always possible under the EU state aids regime in any event — there was no reference to Brexit. Once again, the assumption was there that Brexit has been “done” and that we should move on.
Of course, Brexit has not been “done”. During the course of this year, further measures come into effect completing the UK’s transition to a third-party economy outside the EU’s ambit; these include hugely onerous checks on food produce, which will exacerbate delays and increase costs, on top of the measures that came into force on 1 January this year and are already causing 20km traffic jams leading into Dover and Calais. The real economic effects of Brexit are only beginning to play out.
Reeves referred to the fact that we are in the grip of a cost of living crisis. Why? Well, two reasons: the effective 18% devaluation of the pound since Brexit, when our economy imports half its food; and the supply shock caused by the combination of losing EU workers and the costs and delays imposed by checks at the borders. In other words, this inflation is caused by the results of Brexit, and those factors will get worse, not better.
The economics is not difficult: Brexit is the cost of living crisis. And these are not teething problems, these conditions are absolutely inseparable from the terms of the hard Brexit that Conservatives delivered and Labour declined to oppose.
And against that background, repeating the slogan that Labour will “make Brexit work” — while ruling out any serious change to the terms of the UK’s newly-negotiated relationship with Europe — seems to me to be intellectual self-deception on an epic scale. As a direct result of Brexit, the UK will be a poorer, less competitive, less productive society. It simply will not deliver the vision that, hazy as it was, Reeves seemed to be aiming for in her speech.
A second, related, key weakness of Reeves’ speech was the emphasis on conventional models of employment; Labour talks about secure jobs, but what if your economy is increasingly structured in such a way that work increasingly does not pay? One of the defining characteristics of modern Britain is in-work poverty — something that hugely undermines the ability of the UK economy to grow and, above all, to function fairly. There were the usual nods to education and training, but nothing to challenge the structures of an economy in which work doesn’t pay — indeed, in the knowledge-based economy she envisages, without structural change those inequalities may well worsen.
In Wales, the Labour Government is committed to a trial of Universal Basic Income. While there are real concerns about the structure of that trial and whether, by focussing on one particularly deprived group, it can produce useful information about a universal scheme, at least one part of the Labour movement is willing to think about the relationship between work, income and inequality. Yet Reeves fails to acknowledge a debate that is increasingly moving to the centre of the progressive debate around economics.
It emphasises that Labour has not really had anything that has looked like a radical or progressive economic strategy since Gordon Brown stood down as leader. New Labour posited the idea that growth could create a virtuous circle of better public services paid for by booming tax revenues; that dream, which worked for a while, was brutally taken down by the crash of 2008. Since then Labour has had nothing to say — from the austerian me-tooism of Ed Balls through to the scattergun statism of Corbynism and now this speech from Rachel Reeves: a collection of economic cliches hiding a lack of economic imagination and refusal to ask the big questions and to get to grips with inconvenient fact.
It’s weak, empty stuff. And we on the progressive side of politics need to be so, so much better than this. We need to challenge the lie that Brexit is anything other than a combination of neoliberal ideology, intellectual abdication and sheer political incompetence, and need to understand that repeating the slogan “make Brexit work” is an admission that either you don’t or won’t understand it — least of all in its economic aspects. You cannot base a credible economic strategy on serial dishonesty about the root causes of economic problems.
And we need to challenge the traditional Labourist view that the way our of poverty and to economic fulfilment is work, on the conventional employer-employee model; because the world has moved on from that.
There is a vital debate about the future of economics. But Rachel Reeves seems to have confirmed that Labour’s leadership will continue to opt out of it. It prefers instead a world of comforting cliches and the fantasy that you can “make Brexit work”. Something a lot more solid and intellectually worked-through is called for.
