To hear Labour’s economic message, one might wonder if Downing Street has developed an unlikely admiration for Liz Truss. Given its focus on growth through cutting planning regulations, reducing welfare budgets and removing dissenting bureaucrats, some believe Labour is in danger of echoing not just the spirit but the substance of Ms Truss’s brief, ill-fated tenure. For a party that rose to power criticising the Tory right’s ideological misadventures, this shift in tone is striking.
Sir Keir Starmer and Rachel Reeves may see Labour’s sinking poll ratings as reason to align with their opponents, adopting policies – like curbing legal challenges to planning decisions – few rightwingers would contest. In a speech later this week, Ms Reeves plans to give the go-ahead for a third runway at Heathrow, a divisive choice even within Labour that has earned support from the Tory leader, Kemi Badenoch.
The worry is that this is more than rhetoric. Ms Reeves’s championing of less City regulation is alarming given its role in the global financial crisis. The 2008 crash should have ended the orthodoxy that markets could self-regulate and manage risk efficiently. Yet Ms Reeves appears to revive it, alongside the myth of the “confidence fairy”, which claims private investment surges with deregulation, fiscal discipline and low taxes. Even the International Monetary Fund has debunked such notions, noting that austerity suppresses demand and deepens recessions, harming employment and public services.
Ms Reeves’s comments at the World Economic Forum in Davos last week are further evidence of her shift. Declaring growth the government’s top mission – trumping green policies – she dismissed environmental concerns as trivial, referencing “bats and newts” and downplaying the effect of future carbon emissions. Yet globally, long-term growth is impossible without tackling the climate crisis, and for the UK, net zero offers a powerful driver of growth in the short and medium term. The economist Anna Valero, now advising Ms Reeves, reached this conclusion last year, and she was right. Public investment in green infrastructure is essential for sustainable demand and job creation.
Expanding aviation, however, undermines the UK’s climate goals unless the sector’s emissions are curbed. Legally binding carbon budgets should see reduced leisure air travel, more high-speed rail investment and ministers keeping net zero promises. Ensuring this green transition must be a Labour government’s priority. In a wider sense Labour faces a critical decision: how to balance the short-term benefits of financial capital flows with the long-term need to rebuild the UK’s industrial base in an environmentally sustainable way. Ministers will know that Britain will suffer if they get it wrong. An overreliance on capital inflows exacerbates inequality, deepens regional disparities and undermines industrial development.
Leadership means setting a vision and bringing the public along, even when it challenges vested interests. Labour’s approach sacrifices bold action for short-term appeasement of business. Donald Trump has undermined global climate efforts. But progress endures. History shows real change requires bold leadership: think of Nye Bevan with the NHS or Franklin Roosevelt with the New Deal. A Labour government must lead on green growth, which is necessary for both prosperity and equity. Failure to do so risks rendering its approach indistinguishable from the policies it once opposed.
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