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Posted: 03.07.24

Race for Downing Street: Going for growth

The last time we had a change of government, the departing Chief Secretary to the Treasury famously left a note for his successor, simply stating that ‘there is no money’. Given the current state of the economy, might a similar note today be in fact more appropriate than ever?

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Barring any major surprises, Reeves looks set to acquire the keys to 11 Downing Street, becoming Britain’s first female Chancellor and faced with the unenviable task of fixing the economy. Throughout the election campaign, Reeves and her Labour colleagues have been adamant that they will neither raise taxes or make cuts to public spending, instead relying on a combination of adding VAT to private school fees, cracking down on non-doms and introducing a windfall tax on energy companies to fund their pledges.

Growth is also central to Labour’s vision, with the first of their five ‘missions to rebuild Britain’ being to kickstart economic growth, while simultaneously omitting explicit mentions of London (or Manchester or Birmingham…) from the manifesto entirely. How can a Labour government be so focused on growth without even mentioning the capital in the manifesto? London may have fallen out of favour with the Conservative Government in the era of ‘levelling up’ (which on many accounts has largely been a failure), but it should be apparent that London is central to boosting the economy and promoting growth.

It wouldn’t be fair to say that Labour has been neglecting the capital entirely. Since her appointment as Shadow Chancellor, Reeves has been tasked with improving Labour’s relationship with business and overall convincing voters that a Labour government can be trusted on the economy, repairing the reputational damage done during the Jeremy Corbyn years. Where better to do that than the City of London? We have seen Reeves embark on her very own prawn cocktail offensive, wooing big business and offering assurances that the economy will be safe in her hands. Her efforts look like they’ve paid off, with businesses more likely to back Labour than the Conservatives and 120 business leaders publicly indicating their support for the Party.

However, it is not just business that needs to be supported by a Labour Government to boost economic growth. Labour’s manifesto includes a number of commitments related to education and training – surely London has a lot to contribute to this, being home to some of the country’s (and the world’s) best higher education and research institutions.

London also sustains a thriving tourist and visitor economy, with 5.4m overseas visitors visiting the capital between July and September last year, injecting a record £4.7bn into the economy. Labour has pledged to implement a creative industries sector plan, creating jobs and boosting growth in film, music, gaming and other creative sectors, as well as continue to deliver international sporting events. It’s hard to see how these goals are achieved without London, home of arts, culture and history, and a global soft power dynamo playing a significant role.

While Labour has made a number of pledges related to transport and infrastructure, there is no detail on how a Labour Government would work with the Mayor and Transport for London (TfL). Since the beginning of the pandemic, which saw passenger numbers (and therefore income) plummet, TfL has largely lived hand-to-mouth, relying on short-term grants from the Conservative Government and being turned into a political football in the process. Given how critical a functioning transport network is to London’s economy, a Labour Government serious about growth would certainly provide adequate, long-term funding for TfL. The city desperately needs to be able to continue to run efficient services, as well as invest in big capital projects such as the extension of the Bakerloo Line and Crossrail 2, both of which would in turn unlock thousands of homes and jobs. Labour has, so far, remain tight lipped on whether any funding would be forthcoming for big new projects in the capital.

On the matter of transport, Reeves’ recent suggestion that she would support a third runway at Heathrow (though she said that she would ‘need to look at all the evidence including around the environment’), is perhaps an acknowledgement that expanding London’s transport capacity and global connectivity would boost growth. But given the opposition many London politicians – including Labour councils, MPs and the Mayor – have to a third runway at Heathrow, this could yet be an early test of the new Government’s determination to overrule local resistance in order to get things built.

Labour has said that it will introduce a statutory requirement for combined authorities to make Local Growth Plans, this is a step in the right direction but will surely need considerable Government support if they are to be effective. Mayors and council leaders will need the full tools to be able to do the job properly – across skills, adult education, planning, housing and transport – backed by sufficient funding and a degree of independence from central government – if this is to succeed. It is only through overt collaboration with the leaders of our cities, most of whom are now Labour politicians, that the Government can ensure they contribute to growth and economic recovery.