“There is a role for the tax system in supporting investment”– Rachel Reeves’ speech to MakeUK

Below is the full text of Shadow Chancellor Rachel Reeves’ speech at MakeUK’s annual conference in London this morning:

Thank you Steph – and thank you Stephen at Make UK for inviting me here today.

What a pleasure it is to be with you all. And what an honour to speak after two such distinguished figures. Rory and Alastair are an inspiration to all of us in politics – a reminder that there is life after Westminster after all. Selling out the Albert Hall; Gigs up and down the country; The Morecambe and Wise of the podcast world only without the pyjamas.

Now, it may come as a surprise to you but to me it’s felt like a slow start to the political year. We’re already in March – and I’ve still only faced one Chancellor of the Exchequer. Last year I faced four in just six months. Now, one of the real privileges of my job is to be able to visit businesses all around Britain; To witness all that incredible innovation, commitment, and creativity.

From the development of battery-operated trains at Hitachi in County Durham; And hydrogen-powered engines at JCB in Derbyshire; To Northumbria Healthcare, working with the NHS to produce PPE here in Britain.

British manufacturers played a crucial role in getting us through the pandemic; And they are at the forefront of our efforts to decarbonise our economy and achieve energy independence. With a Labour government, manufacturing will be a source of pride – not only pride in our heritage, but in our future too. But when I meet business leaders as well as a determination to succeed what I hear, time and again, is a deep sense of frustration.

Frustration that for all that hard work and creative talent.For all the potential that exists in this country too much is being squandered amidst political dysfunction and economic instability. I know British manufacturers have been particularly impacted: by inflation; by supply chain disruption; by labour and skills shortages; and by the effects of instability in economic policy and in our politics. And affected, too, by our enduring economic malaise; that vicious cycle of low growth, low productivity and low investment.

I started my career at the Bank of England. I was assigned to monitor the performance of the Japanese economy during what was then known as Japan’s lost decade. We now speak about Japan’s lost decades. So I know something about what can happen to an economy once the envy of the world if it becomes trapped in a cycle of low growth, lost confidence and weak demand.

If we continue on this path the average family in Britain will be poorer than their counterparts in Poland by 2030. Escaping that cycle requires us to focus all our energies on driving up the investment that will, in turn, power strong growth and thriving industries. This will mean a whole new way of doing things – one that learns the lessons from the crises we have faced.

As your report shows today, British manufacturers are already acting to build supply chain resilience.But government too must learn lessons: to prize economic resilience alongside openness; to support a dynamic private sector with an active state. To embrace a new approach; what US Treasury Secretary Janet Yellen calls ‘modern supply side economics’.

It is based on the understanding that strong and inclusive economic growth requires active government creating the foundations upon which a strong private sector can build by providing the stability businesses need to plan ahead; and expanding the productive capacity and the resilience of our economy.

In place of sticking plaster politics, what Labour offers is mission-led government: future-facing and guided by clear and ambitious strategic priorities; bringing public and private sectors together around shared purpose.

Last week, Keir Starmer and I set out details of our mission for the UK economy, a mission to secure the highest sustained growth in the G7 with good jobs and productivity growth in every part of the country making everyone, not just a few, better off.

An ambitious goal, certainly; one based not on a naïve hope; but on that modern supply side approach. Let me tell you what that can mean for manufacturing. It begins with strategic partnership, between government and business. That partnership will be enshrined in a new Industrial Strategy Council revived and set on a statutory footing as set out by the Shadow Business Secretary Jonny Reynolds.

We will use all powers at government’s disposal to buy, make and sell more here in Britain; to support British industry and reduce our reliance on fragile international supply chains. And we will set a target for R&D spending of 3% of our GDP. There needs to be support for small businesses with business rates now.

And the next Labour government will replace our outdated system of business rates with one fit for the 21st century; easing the tax burden on bricks and mortar businesses; always incentivising investment – especially in those areas that contribute towards decarbonising our economy; reducing uncertainty – with frequent revaluations and instant reductions in bills when property values fall; and rewarding, rather than punishing, entrepreneurs – with incentives for businesses to move into empty premises.

But if we are to tackle our economic weaknesses, that must mean repairing the damage from our botched Brexit deal not the single market or customs union, but forging a closer relationship with the European Union with practical reforms to help grow our economy.

Our current deal has left British exporters tied up in red tape so we will fix the holes in the deal so that great British businesses, big and small, can export. So that we can boost inward investment in the UK, and help our innovators and universities participate in the Horizon scheme. Making Brexit work for UK manufacturers.

And the centrepiece of that modern supply side approach is Labour’s Green Prosperity Plan; a plan to decarbonise our economy; to drive down bills; and to let British businesses compete in the global race for the jobs and the industries of the future; that plan will rely upon government and business working, and investing, together.

As the Biden administration’s Inflation Reduction Act galvanizes green energy in the United States and governments around the world, from Europe to Australia, respond it is not enough here in Britain to cling to old ideas and old methods while others steal ahead in that global race.

So a Labour government will act. Let me give you an example from this week’s headlines: The automotive industry is a vital pillar of UK manufacturing. A crucial basis for research and development, a source of pride, creativity, and good work, and an industry which supports an extensive supply chain. Yet in recent times it looks like the government has been asleep at the wheel, as one bit of bad news has followed another.

Honda – permanently closed. Electric mini production – moving to China. Ford – a loss of thirteen hundred jobs, many from Denton in Essex. British Volt – the great hope of the battery industry – collapsed with the remainder sold off.And where has the government been?  I know Make UK have long argued for a serious strategy to enable the transition of the automotive sector and its supply chains to electric; but for too long those calls have fallen on deaf ears.

The automotive industry is far too important for the government to stand back out of an anachronistic opposition to the very idea of industrial strategy. When it comes to battery production – and to a host of other industries too – the question is, quite simply: Why not Britain? Right now the government should be going the extra mile to make sure the UK can be home to successful, large-scale battery production; and that should start with Jaguar Land Rover.

Labour’s Green Prosperity Plan offers an alternative, in step with the times: A new National Wealth Fund that will part-fund eight new gigafactories with a £2bn Battery Power Fund to ensure the future of the UK automotive industry.This approach, and that mission, reflect the scale of ambition that government should be showing: on climate, on industry and jobs, and on economic growth. And that level of ambition is what we should be expecting from next week’s budget. There is another dimension to this approach which I want to talk about today.

Central to a mission based approach – central to strong investment – are stability and certainty in place of chaos and an 11th hour approach that hampers investment and growth. Nowhere is that clearer than in our tax system. In recent years, corporation tax has gone up and down like a yo-yo while the government has papered over the cracks with short-term fixes like the super-deduction.

That adds up to 22 changes to our corporation tax arrangements in just three years since the start of this Parliament. So it’s no wonder businesses are unable to plan, and our investment rates are cratering. The answer is not unfunded tax giveaways – we’ve seen where that takes us. But Labour knows that there is a role for the tax system in supporting investment.

As Chancellor, I will put an end to that uncertainty by providing stability in business taxation. And so today I can announce that Labour will undertake a review of our business tax regime.  The review will look at how we can build more stability for businesses in the tax system, and drive that crucial investment forward. And as we await next week’s budget, let me say this:

We will look closely at what the government proposes on capital allowances in that budget; And I am urging the government to show they understand the need to support business investment as part of that.

So if the government brings forward a genuine boost to investment – and if it is affordable – we will back it to help get our economy growing again. But stop-go tax policy is no more than a sticking plaster. What businesses need are certainty, consistency and incentives for investment. Labour will provide that.

The mission is to secure the highest sustained growth in the G7, with good jobs and productivity growth in all parts of the country, making everyone, not just a few better off.

The method is a modern supply side approach. Pro-business and pro-worker, in the knowledge that each is dependent upon the success of the other.

Powered by our Green Prosperity Plan. Shaped by our modern industrial strategy and active partnership with businesses. Underpinned by fair taxes that incentivise investment.

Built on the rock of economic stability. I can’t wait to work with all of you to make these ambitions a reality.

Thank you.