You-too economics

Keir Starmer’s Labour government has embraced deregulation. In a speech last month where he set out plans to reform the public sector, Starmer announced a new target for government to cut business compliance costs by a quarter. Shortly afterwards, HM Treasury announced a large-scale programme of reorienting regulation towards supporting growth. The prime minister also announced the abolition of the Payment Systems Regulator in the financial services industry.

This comes a few short months after Keir Starmer’s Christmas eve letter to UK regulators, directing them to bring forward proposals for growth; subsequently, the chair of the Competition and Markets Authority was forced out. Not to forget the prime minister’s fighting talk over the planning reforms he hopes will support his goal to deliver 1.5m homes by the next general election.

That the first Labour government in15 years is presiding over a deregulatory agenda may be uncomfortable for some progressives. True, in its embrace of the supply-side, Labour is not dismantling worker protections or privatising public assets. On the contrary, the government’s Employment Rights Bill, which is currently going through parliament, will strengthen and modernise worker protections, and rail privatisation is set to be unwound as Great British Rail is brought to life. Starmer’s is also a state that aspires to an active industrial policy. Crucially, Starmer and Reeves maintain that their planning and regulatory reforms are designed to increase economic capacity in ways that directly benefit working people. This, at least on its face, represents a fundamental departure from previous iterations of supply-side economics.

With the benefits of these reforms unlikely to be realised before the end of the current parliament, and a very real electoral threat awaiting at the next election, Labour must flesh out this approach. It must bring into sharper relief, in prose and poetry, how these measures will deliver for working people.

The chancellor, Rachel Reeves, entered government with the ambition to “secure the highest sustained growth in theG7”. Tight finances, along with her own self-imposed rules, meant she had no recourse to the tools Labour governments have traditionally relied on to jumpstart economic growth – let alone the latitude to match the ambition of Bidenomics across the Atlantic.

The UK government has instead been focused on unleashing private-sector dynamism, tackling key regulatory blockers to eke out every basis point of growth they can get. Ministers have also been trotted out to emphasise the virtue of work with an eye on the unprecedented number of working age adults now outside of the labour market due to long-term ill health.

In all of this, and in many other areas, it is still quite difficult to identify how the benefit will flow to Labour’s core constituency: working people. The transmission mechanism between the bonfire of ‘redtape’ and tangible improvements in living standards for ordinary Britons, with a few exceptions, remains tenuous and abstract. Earlier this year, the Good Growth Foundation (GGF) published polling which found that only 1 in 4 voters had a positive view of Labour’s plans for the economy, while a third reported a very negative view. Their analysis exposed swing voters ‘feelings of distance from the benefits of growth. One voter from Wakefield and Rothwell, for example, told them: “It feels to me like it’s the wealthy who are gaining the most from a successful economy at the moment, and the other people are getting squeezed out.” GGF observed that the “trust that a growing economy will improve people’s living standards is broken”. Starmer’s Labour will need to contend with this sentiment as it goes all-in on its growth mission. It will need to carry these voters along. If not immediate extra pounds in their pay packets, they’ll need clarity on how the government’s supply-side push will deliver for them down the line.

Starmer could learn from his own approach on housing. Here, he has told a more vivid story, centred around helping young people secure “a base camp for life”. This may be accompanied by changes in regulation to support banks offering more favourable lending terms to first-time buyers; innovation around the supply of part interest-only mortgages; and the Financial Conduct Authority’s recently announced work to support access to mortgages.

Despite attempts to centre working people in the drive for economic growth, voters are yet to see themselves in the picture of a thriving economy. Instead, economic growth seems something that happens to other people. Labour must make clear how reforming regulation can help –and that working people have a stake in it.

Image credit: Robert Wade via flickr