Five policies the Chancellor hopes will fire up the economy
This week has been all about growth.
Chancellor Rachel Reeves committed to going “further and faster” on kickstarting economic growth, announcing a slew of plans that she hopes will end more than a decade of stagnation.
Her announcements have been given added urgency by the economy’s weak performance since Labour entered office, with growth having ground to a stop since the summer.
But what are the policies that Reeves hopes will lift the economy?
Heathrow
The major headline from Wednesday’s growth speech was the confirmation of the government’s support for a third runaway at Heathrow Airport.
The west London airport has been operating at full capacity for over 20 years and Chancellor Reeves said expansion was “badly needed”.
“A third runway at Heathrow would unlock further growth, boost investment, increase exports, and make the UK more open and more connected as part of our Plan for Change,” she said.
It would increase the number of flights permitted to take off from Heathrow to 720,000, up from 480,000 at the moment.
Reeves said she wants to see “spades in the ground” by the end of the decade and suggested that the runway could be completed by 2035.
However, environmentalists are concerned that support for a third runway is incompatible with the UK’s net zero commitment.
Oxford-Cambridge Arc
Alongside Heathrow, the other main new announcement on Wednesday was the government’s revival of the Oxford-Cambridge Growth Corridor.
Although the two university cities are just 66 miles apart, it takes two-and-a-half hours to travel between them by train. House prices in both cities are also extremely high.
Reeves hopes that by building thousands of new homes and improving transport links between the two cities, the government could create “Europe’s Silicon Valley”.
No new money was announced, but the Chancellor confirmed funding for East-West rail, a rail line which will connect Oxford and Cambridge, and also announced support for “new and expanded communities” in the growth corridor.
“To grow, these world-class companies need world-class talent who should be able to get to work quickly and find somewhere to live in the local area,” she said.
The Treasury claims that the plans will add up to £78bn to the UK economy over the next decade, although some have questioned this claim.
Planning reform
Neither of these proposals are new. This is the third time a government has approved for a third runway at Heathrow, and the OxCam Arc was a pet project of Theresa May.
Reeves hopes that she will succeed where others have failed because she’s more serious about reforming the planning system.
“There’s no point in announcing a third runway at Heathrow if you’ve got the same planning system we have now because it would take decades,” she said.
“That is why it is different this time, because we’re reforming the planning system“.
The government put forward plans over the weekend which will make it easier for major pieces of infrastructure to secure approval, while potential housing developments in high-growth areas will also be more likely to get the green light.
Deregulation
Reforms to the planning system are part of the government’s wider attempt to strip back growth-inhibiting regulations.
Writing in the Times on Wednesday, Starmer said “deregulation is essential” as he vowed to cut through “thickets of red tape”.
Both Starmer and Reeves, have taken aim at regulators in recent weeks and wrote to 17 watchdogs on Christmas Eve demanding they set out plans to boost the economy.
“Businesses are held back by a complex and unpredictable regulatory system and that is a drag on investment and innovation,” Reeves said.
Pension funds
Another strand of the government’s growth agenda – inherited from the previous administration – is the drive to increase domestic investment, particularly from pension funds.
The government has already made a series of announcements on pensions, but on Tuesday ministers confirmed plans that would allow for pension funds to invest trapped ‘surplus funds’.
Around 75 per cent of defined benefit schemes are in surplus thanks to higher interest rates, which means the value of their assets outweighs liabilities to members.
Some £160bn has been locked up by current investment rules and prevented from flowing into businesses and the wider economy, the Treasury said.