‘How Reeves can learn from the failures of Bidenomics – and make levelling up work’

Progressive governments across the world are learning a hard lesson: even if businesses and economists are patting you on the back, if growth is not felt by people across the country, you will not be rewarded.

In the US, Democrats lost the election despite record job creation and investment, as voters felt no better off. In Germany, regardless of being an industrial export powerhouse, Olaf Scholz’s coalition goes to the polls amid economic uncertainty, and Canada’s Liberals are sinking as wages lag behind inflation, despite their GDP growing faster than the UK’s.

These examples should be a warning for Labour that economic success on a spreadsheet is not enough — people in every part of the country need to feel the benefits in their wages, job security, and cost of living.

Rachel Reeves recognised that in her growth speech today, and its why Keir Starmer is absolutely right to make growth and cost of living the defining missions of this government.

Breaking the cycle

The Chancellor reiterated today that Britain cannot afford another lost decade of stagnation and low productivity. Equally, it will be impossible to deliver the improvements to public services – a core part of Labour’s mandate to deliver at the election – without GDP growth, regardless of what or where it came from.

But ultimately, the government is trying to achieve and align two objectives with a growth strategy that both addresses low business confidence and translates into higher living standards for people across the UK.

Reeves’ speech today set out a vision for unlocking investment and spurring innovation, with a focus on the Oxford-Cambridge Growth Corridor. This is a welcome recognition that Britain has world-class strengths in science and technology.

But if Labour wants to deliver the kind of growth that can rebuild trust in government, it cannot rely on a faster version of the same old growth model — a model that concentrated prosperity in a handful of regions while leaving too many places behind.

READ MORE: ‘Streeting’s right we must take on Farage – but wrong on how to do it’

Successive governments have promised to “level up”, only to fall back on boosting London’s financial sector and investing in the South East. This might eke a little more out of the UK’s existing growth model, but they won’t fix its deep-rooted weaknesses.

The truth is Britain’s pre-pandemic economy was growing — but that growth wasn’t working for enough people. Wages stagnated, regional inequality widened, and too many communities outside the South East saw little benefit. GDP growth matters, but whose GDP growth?

Labour has a chance to break this cycle. Reeves’ Mais lecture was right when she said: “To grow our economy, we cannot rely on just a few pockets of the country to drive growth and productivity.”

If we can raise five or six British cities to the level of London’s productivity, Britain’s growth would take off. These cities were name-checked in today’s speech but were largely neglected in terms of announcements.

‘A bold step in the right direction’

A broader economic strategy is needed to create more clusters of successful businesses in more places with investment, stability, and green growth. First, Labour must ensure investment flows to every part of the country.

The National Wealth Fund, with its focus on crowding in private capital, is so important and today’s emphasis that it will be working with regional governments across the country is welcome. It  must support businesses outside the South East and the investments in the Chancellors speech echoed that.

Infrastructure, housing, and skills investment will be critical to making every part of Britain a great place to do business. Companies in the North East, the Midlands, and Scotland stand ready to lead in tradeable services, advanced manufacturing, life sciences, and clean energy, but they need the right conditions to grow and thrive.

Second, Labour must resist the temptation to chase the short-term. The government is right to act to address low business sentiment, but we’ve got to remember we’ve only had one, provisional, post-budget GDP datapoint and all of the increases to public investment are still to take effect.

Yael Selfin, chief economist at KPMG UK, anticipated that “growth will accelerate in 2025 thanks to a sharp increase in government spending.”

Most businesses are costing in the downside of higher taxes but not the upside of a £100bn public investment boost. Too often, governments have rushed to show results, chopping and changing policies in search of quick fixes. The last 14 years of Conservative governing saw 11 different growth strategies. Labour shouldn’t be as impatient.

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Third, Labour must put green growth at the heart of its strategy. Rain Newton-Smith, CEO of the CBI, said “Green truly is the economic growth opportunity of the 21st century, with our research showing it could deliver as much as £57bn to the UK economy. That’s something we can’t afford to miss out on.”

Reeves is spot on when she says that Britain’s green industries — from offshore wind in the North East to electric cars and trains in the Midlands — are already internationally competitive and have the potential to be world leaders.

Support for these sectors, with investments like the Chancellor outlined in rail connections and clean manufacturing, are a better route to growth than growing airports in the South East.

The Chancellor’s speech is a bold step in the right direction. But if it is to deliver the fairer, more dynamic economy Britain needs, it must go further, ensuring that the benefits of growth are not just concentrated in existing centres of success but spread across the entire country.

That is how Labour can prove that progressive governments can deliver not just growth, but growth that people can feel in their daily lives.

Read more on Rachel Reeves’ growth plans:

• ‘If we ducked tough choices for growth, Britain’s spiral of decline would continue’
• Reeves heads-off southern bias claims with focus on northern investment
• ‘Tearing up regulations or bending the knee to billionaires won’t deliver growth’
• Reeves just gave absent Miliband an airport he wants, not just one he doesn’t
• Heathrow debate: ‘A third runway would shred Britain’s green credibility’
• Heathrow debate: ‘Third runway Labour’s trump card for trade and growth’

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