Starmer’s full economy speech: “Labour will offer a new deal for the public”

Keir Starmer

Thank you, Torsten. It’s a privilege to speak at an event like this, dedicated to the biggest question in British politics, and on behalf of an organisation that always shines an unsparing light on what working people need; the economic security that is essential for their hopes, their aspiration, their future. It’s the purpose which drives everything my Labour Party seeks to achieve.

So I want to start by thanking Torsten, all the commissioners on The Economy 2030 Inquiry and everyone here at the Resolution Foundation for all the vital work you do guiding that mission. I know it’s been a busy year. I’m just sorry I can’t promise next year will be much quieter.

Now, I suspect this is a room that likes a graph, and not in the way the Lib Dems do either, so I would like to start by drawing your attention to a chart published by the Resolution Foundation, following the autumn statement.

Some of you may have seen it. It’s truly shocking because what it shows is that this parliament is on track to be the first in modern history where living standards in this country have actually contracted. Household income growth is down by 3.1%. Britain, worse off. Now, over the past 13 years we may have become a little desensitised to findings like this.

But these aren’t the concerns of the past. This isn’t living standards rising too slowly or unequal concentrations of wealth and opportunity. This is Britain going backwards. Decline. Not just diagnosed subjectively, by politicians. A decline that can be measured and experienced in the homes, the pockets, the aspirations and anxieties of millions of people across Britain.

Raising productivity growth will be Labour’s “obsession” in government

Now, I’m not here today to hit you over the head with the statistics that flow from this, that’s Torsten’s job. But what this does to a country, the cultural trauma, this needs to be understood.

I go back to the 1970s, growing up in an ordinary working class household. A decade where we had our fair share of cost-of-living crises. I know what this feels like. I know, when you’re struggling to make ends meet, and we were, that the natural response of working people to work harder and harder can feel like you’re running faster and faster into a brick wall. That rising prices create this kind of “what next” anxiety and a fear, and it really is that, of going to the shops because of the decisions you might have to make.

And yet that graph shows, unequivocally, that this is worse than the 1970s.  Worse than the recessions of the 1980s and 1990s. Worse even than the global crash of 2008. And before anyone ventures the pandemic and war in Ukraine as explanations, big shocks undoubtedly, I point to the evidence The Economy 2030 Inquiry has set out at length.  That our productivity failings, the root cause, pre-date those shocks. And that other countries, comparable countries, have dealt with those same challenges much more effectively.

So we are in a hole, no doubt about it. And what this feels like is a clouding over, a loss, of the future. Because what my parents felt in the 1970s is that, while day-to-day life was often very tough, the future would be a happier place, Britain would be better for your children and hard work, in the end, in the long run, would be rewarded.

And that was a comfort to them, a security blanket – if you like.  But one, which for working people in Britain now, sadly no longer exists. That is the upshot of that graph. A political consensus that if you work hard and play by the rules, you will get on, a glue that binds British society together, has become nothing short of a lie – for millions. It’s a well from which so many political horrors can spring.

But I say to all of you, if we are privileged enough to be elected next year. The quack diagnoses, the search for distractions and excuses, all that ends. Because the defining purpose of the next Labour government, the mission that stands above all others, will be raising Britain’s productivity growth. A goal that for my Labour Party will be an obsession. That’s a big change for us.

Having wealth creation as your number one priority, that’s not always been the Labour Party’s comfort zone – trust me! But that’s the change I knew was necessary, that’s the change I’ve delivered, and my party is united behind it.

‘This is a new era and we need a new economic consensus’

We see clearly the country before us. But I do want to be clear, it’s not the case that ‘any growth’ will do. No, we can’t be agnostic about the sort of growth we pursue, anymore. The growth we need must better serve working people and must raise living standards in every community.

Now – I know this is a room that will know exactly how hard a mission that is. We all know the headwinds. The revolutions in energy, science, technology, the rising geopolitical temperature, terrorism, climate change, securing our borders, an age of insecurity, we see all of that.

And yet the truth is, even before so many of these threats, it wasn’t exactly a golden age for living standards, equality or productivity was it? And even during the last time we were in government, even when we enjoyed the most sustained period of redistribution in British history, did it also redistribute dignity and respect to working people, or was that glue – for too many places – starting to come a little unstuck?

No, the truth is – despite all the headwinds, despite the inheritance being stored up for us. This is a new era and we must establish – as other politicians have in the past – a new economic consensus. With a different model of growth, a different set of values and a different analysis of the state and its role in the economy.

Some people have called this “modern supply-side theory”. Because it recognises that the unchanging fundamental – that growth comes from supply-side expansion – now needs a new tool-kit. Others have called it “productivism”. Acknowledging the obsession with raising productivity that is now required.

They’re both good – but for me, the best description comes from my favourite economist. Who calls it “securonomics”. It’s not easy to say! But nonetheless Rachel Reeves’s description is perfect. Because in a single word it captures all the insights that will shape this era – and our approach.

‘Securonomics captures all the insights that will shape this era’

First, that the stability we enjoyed during “the great moderation”. That period of calm before the financial crash. And the conditions it provided for hyper-globalisation. That era is over. Co-operation and trade must now respect a mutual need for security.

Second, that broad-based growth – economic security for every community – is now the only way to a stable politics and national unity. In short – we have to deliver on ‘levelling up’. We have to provide a more secure foundation for working people to get on.  With cheaper bills, more home ownership and stronger worker rights.

But most of all – we have to provide sustained economic stability. This isn’t just rhetoric. When politics keeps lurching, when you lose control of the economy – as this government has – that loads political insecurity onto the backs of working people.  And family finances take the hit.

Third insight. A ‘sticking-plaster’ approach to public investment, seen again in recent cuts to capital investment, is bad for business investment. Bad for living standards. Bad for growth. And – in the end – bad for the public finances as well.

Fourth, that the old laissez-faire complacency on industrial policy will not deliver the long-term stability that investors need in this era.

And fifth, that in a world where the likes of Putin will weaponise key supply chains. Outsourcing critical industrial capacity is damaging. Not just for economic security, but also for national security.

Now – if you fail to act on these five principles, the end result is an economy more vulnerable to the shocks of our age of insecurity. And, at the level of ideas, that – in a nutshell – is the economic story of Britain over the past 13 years.

The Tories have been waiting around for the genteel conditions of the great moderation to return, rather than letting go of a failed ideology. They have refused to reassess the role of government as the careful steward, in tough times. For security, growth and economic stability.

Labour will be “ruthless” when it comes to spending wisely

Because government can and must set the mission. Government can and must shape markets, not just submit to them. Government can and must reform our economic institutions, rather than just mop up after the event with the state’s big cheque-book.  And, above all, government can and must hold out the hand of partnership to business.

Build shared institutions, like a national wealth fund. Like an industrial strategy council. Like a joint undertaking on skills. A new architecture for growth.  A new foundation for security. Security from tyrants. Security from global headwinds. Security for working people and business. That’s securonomics.

And no matter what is stored up for us, it will remain our north star. But of course – we cannot ignore our financial situation. So while I welcome some of the individual measures in the autumn statement – tax cuts for working people are a good thing – it was also a budget for growth that ended up downgrading growth. And a budget for tax cuts that confirmed the highest tax burden since the war. A fiscal sleight of hand. That showed the government is quite prepared to salt the earth of British prosperity, in pursuit of its political strategy.

Now – I don’t think any of you expect me to announce Labour’s spending envelope on this stage, today. And I won’t. Nonetheless, it’s already clear, that the decisions the government are taking, not to mention their record over the past 13 years, will constrain what a future Labour government can do.

I mean, sometimes you have to laugh when they talk about that note in 2010. Because the comparison between 2010 and today is instructive. Compared with 2010. Now, debt is much higher. Interest rates much higher. Growth stagnant. Britain’s standing diminished. Public services on their knees. Inflationary pressure, serious. Taxes higher than at any time since the war.

None of which was true in 2010. Seriously – never before has a British government asked its people to pay so much, for so little.  That’s why growth is everything. It’s not just the quickest way out of this – it’s the only way. The path to public service investment and keeping taxes competitive. It will be a hard road to walk – no doubt about it.

Anyone who expects an incoming Labour government to quickly turn on the spending taps is going to be disappointed. Inflation, debt, taxes are now huge constraints. Of course – we will make different choices. On the non-dom tax status – invested in cutting NHS waiting lists. On removing private schools tax breaks – invested in high-quality teaching and our children’s mental health.

But at the same time, we will be ruthless when it comes to spending every pound wisely. I ran a public service – in the bad days of austerity. I know how hard it can be.  But I also know you can always find ways to improve delivery. Change your practice, your behaviour, reform your approach.

And when times are tough like now, that is the least people expect. Put it like this. There are millions of people in this country right now, who wake up in the morning and know the day will bring a fresh fight for every penny. Just like the last day. My sister is one of them. I will say to her – let’s go to the pub for lunch. And she will say, straight away: “I’ll make sandwiches.”

So I have said to every member of my shadow cabinet, when they are drawing up their plans for our manifesto. Think carefully – about how precious every pound is for the people we must serve. Hold them in your minds’ eye. And approach the public finances – spending decisions – like it’s their money. Because at the end of the day: it is.

Three “big steps” we can take to get British growth “moving”

But look – this is a counsel of realism, not despair. The UK has huge assets. Flexible product and finance markets, a highly educated population. World class universities. This city – an economic giant. A global economy that is hungry for the services and sectors where Britain excels. Life sciences, the creative industries, technology, clean energy, financial services, advertising.

Then there is the potential of the places that have been ignored. Passed over. Disregarded as a source of growth and dynamism. A potential that I believe is routinely underestimated. And so, with securonomics as our guide. There are big steps we can take quickly that will get British growth moving.

One – we can get Britain building again. We are the only country in the G7 where land development per head has decreased in the past century. The dream of home ownership – ever more distant. Working people – forking out more of their income to chase it. Less security and opportunity. So yes, we must bulldoze through restrictive planning laws. We must remove the blockages that choke the supply-side of our economy. Stop us building the warehouses, trainlines, grid connections, wind farms, laboratories and homes our country needs.

Step two – we can back British business. With political stability and certainty. With a competitive tax regime – we’ve shown our determination on that front. A new direction on skills. Reform of the apprenticeship levy to give business more flexibility and incentivise investment. Technical excellence colleges – specialising in the high-growth, high shortage skills we need. But above all – with that new partnership. A proper industrial strategy – drawn up with business. And a national wealth fund that can de-risk and crowd in major private investment. Because we believe that is our job.  Not to shower taxpayers’ cash on favoured companies. “Picking winners”. This isn’t the old dogma.

But in this global economy, it is negligent not to take a view on which sectors can compete. And even more negligent not to use the power of government to back them properly. This is mission critical. Because we will never arrest our decline unless we become a high investment nation.

Finally three – we can make work pay. You know, even now. Even in the face of the ample evidence on good work provided by this inquiry. Some people still see flexibility in our labour market as one-sided. That growth comes, not from a labour market that asks how we can make workers more productive. But from driving down wages, rights and conditions.

Mark my words – we will consign that argument to history. And I say this to business as well. This is a Labour Party more committed to working with private enterprise than ever before. But a partnership must have a purpose. And the returns of private enterprise must be better shared. Your country needs higher investment. Your workers need a fairer return. And both – will be good for your productivity.

So we will broker a new deal. With increased mental health support. A fully-funded plan to cut NHS waiting lists. An end to zero-hour contracts. No more fire and rehire. A bold new act to stamp out racial injustice. And a real living wage. So, reforming our labour market. Reforming the institutions that drive business investment. Reforming planning and infrastructure delivery.

Three significant steps we can take quickly. Three significant departures from the current British growth model. And all three – laser-focused on clear challenges for our productivity. And three clear divides on growth that will shape the general election. I’m sorry – I do have to mention it. Because it is a big election.

Tory decline has been a disaster for the British people. Labour will offer a new deal for the public. Stronger growth. Rising incomes. Creating the wealth we need to fund our public services. That’s the direction we need. That’s my ambition for Britain.

A chance to turn the page on a miserable chapter of decline. And with a new economic plan. With a new determination. With growth that will deliver the security working people need. We will walk down the hard road towards national renewal. A Britain building again, growing again, believing again. That we will get our future back. Thank you.

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