Reeves pledges ‘strategic state’ amid end of globalisation
Chancellor Rachel Reeves has promised to create an “active and strategic” state as she warned that “globalisation as we once knew it is dead”.
In a flagship lecture at the Bayes Business School on her growth agenda, Reeves suggested the size of the state had been expanded since Labour took office as part of a deliberate strategy to “shape” the future of the UK economy.
She said government efforts doubling down on AI adoption, hiking investment in national infrastructure and boosting ties with the EU were part of a drive to make “conscious and deliberate choices about the sectors…we pursue, and in the capabilities we must protect or grow”.
“Our method is ‘securonomics’. That is built on one crucial idea: An active and strategic state, working with business, can build secure and resilient growth,” Reeves said.
“The active and strategic state is guided by three priorities: stability, investment, and reform.”
No regrets over tax hikes
Reeves said decisions to increase the tax take by some £68bn and introduce deregulation across planning and energy projects were part of a strategy to put the UK economy on a more stable footing.
Referring to oil trade disruptions in the Middle East, which will put “upward pressure” on prices, she claimed she had previously warned about the broad change in international trade and global relations.
“Two years ago, in my first Mais Lecture, I described the new ‘age of insecurity’, marked by the long fallout from the 2008 financial crisis and the seismic events that followed: The global pandemic, war within Europe’s borders, and now in the Middle East, energy crisis and disruptions to global trade.
“These crises affirm the reality that globalisation, as we once knew it, is dead.”
“That easy optimism about global economic integration has faded, with shocks in one part of the world transmitted swiftly along fragile global supply chains, impacting prices and living standards here at home.”
Reeves announces fiscal devolution plans
She said security efforts were “taking effect” through Labour’s net zero drive, fiscal reforms and regulatory measures across the labour market, citing the Employment Rights Bill, and greater public investment.
The Chancellor added that spreading economic growth across the UK, as in the Oxford-Cambridge “corridor” or in northern cities, as well as through the swift adoption of AI technology, would improve the UK’s economic fortunes – though the Chancellor called for “patience” in reforms.
One major reform could result in greater devolution of fiscal policy in what Reeves called a “genuine break with the past”, with full consultations to take place lasting until this year’s Budget.
“They will look at income tax, alongside other taxes, with reforms initially targeted at those places that have the greatest capacity to deliver them, and the greatest potential to benefit.”
“This is not about new taxes and it’s not about higher tax rates – I will not ask taxpayers to pay more. Reforms will be fiscally neutral, focused on sharing and retaining a portion of existing revenues, with the proceeds of growth benefiting the places that generated that growth, while managing volatile receipts both for local areas and for the Exchequer.”
Brexit debates to flare up
The final part of Reeves’ growth push focused on building closer ties with the EU. The Chancellor suggested that “no partnership is more important than that between the UK and our European neighbours” and admitted that Labour was tasked with attempting to “make, and win, the political arguments” around closer links.
While the Chancellor said there was a “red line” to be drawn on joining the EU’s customs union, she would seek to expand trade negotiations between food standards, energy pricing, youth mobility and defence.
“I believe, absolutely, that closer alignment is the right course for Britain – a course chosen as a sovereign nation, a course chosen in our national interest.”
Stride hits back
Shadow chancellor Sir Mel Stride hit out at the poor results of Reeves’ economic reforms so far.
“Reeves wants to blame everybody else but herself for her dreadful management of the economy, Stride said.
“Instead of owning the damage she’s done, Reeves is dragging us back into the old Brexit arguments.
“The Chancellor is utterly deluded and gaslighting the public to cover her own failures.”
Several City economists and business officials were in the audience. Shevaun Haviland, the director general of the British Chambers of Commerce, who attended the Mais Lecture in Canada, said fresh policy updates on the Oxford-Cambridge corridor and AI could “propel our economy to new heights”.
But Haviland warned that firms had been on a “rollercoaster ride” under the Labour government.
The government also said its steel strategy plan would be unveiled this week while new summits would be set up to connect financiers with local businesses alongside the creation of AI institutions specialising in economics and scale-ups.
Stephen Phipson, the chief executive of Make UK, said energy prices were the “single biggest factor” affecting the country’s international competitiveness.
“So long as energy prices remain at current levels we will continue to face the threat of deindustrialisation and the loss of key industries.”