Reeves’ big speech on Wednesday will tell us whether Labour is really committed to growth
On Wednesday, Rachel Reeves is set to give her biggest speech on economic growth yet. She is set to move from strategy to “doing, doing, doing” as one of her aides put it. I certainly hope that this is true, but as always, the proof will be in what she is able to announce.
The truth is that too much has been made of growth strategy and not enough has been made of tangible action that might lead to growth. For starters, the previous Conservative Governments published at least 11 industrial or growth strategies between 2010 and 2024, including Industrial Strategy: building a Britain fit for the future (2017), Build back better: our plan for growth (2021) and Plan for growth and prosperity (2023).
But our GDP and GDP per capita figures have not seemed to notice this intense focus on growth strategy, and have duly stayed flat. Such was their respect for theoretical coherence that the last Parliament was the first to see a decline in living standards in the modern era.
But, the demand for strategy keeps coming back. If you happen to lurk in the same wonky corners of the internet as I do (mostly the Substacks of former government advisers and think tank blogs), you will have likely seen the debate over Labour’s growth strategy, what it is, and whether it makes sense.*
This isn’t the usual debate that we see splashed across our front pages. For one thing, it contains terms like “Schumpeterian creative destruction” and “modern supply-side theory” and other terms that make me nod along and think that I really ought to get a subscription to The Economist.
Instead, if the Labour government wants growth as much as it claims to, then it needs to choose growth. Or, as Janan Ganesh put it, the Government needs a “growth preference”. This may initially seem to be a rather glib observation, after all, every Government says that it wants to achieve growth. If they could simply have chosen it, they would have done so and this wouldn’t be such a major issue.
However, investments that would lead to growth often come into conflict with other important Government agendas, and growth has often lost out. A couple of examples might illustrate the point:
Data Centres vs. Net Zero, NIMBYs, and the Green Belt
Data centres will be essential for the UK’s economic growth going forward. Absolutely no one (sane) disputes this. They are the core infrastructure of the digital economy. They facilitate the ongoing digital transformation of the economy and are a key part of the transition to AI. Shoosmiths estimates that data centres alone could generate £44bn in GVA per year over the next decade. That’s about the equivalent of adding an economy the size of the North East to the UK every year.
But unfortunately, data centres are enormous, ugly warehouses that take up huge amounts of land and energy. There is a very direct tension between building data centres and reaching our Net Zero ambitions both in the UK, and, more importantly, globally.
Also, local residents absolutely hate them. The previous Conservative Government, which also had a stated commitment to growth, refused to overturn local refusals of two data centres in the South East Green Belt, where they would have hugely contributed to the economic performance of the Greater South East.
So far, the Labour Government has given consent to one of those data centres, in Buckinghamshire, and has made much of a commitment by Kyndryl to build a data centre in my local area, Liverpool. However, the consent for the Abbots Langley data centre remains refused. Two out of three isn’t bad, but it isn’t growth at all costs, either.
These tensions only become more stark as the economic case becomes more subtle and the environmental harm becomes more obvious.
The news that the Government is planning on consenting to a Heathrow and/or Luton expansion is another boon for the growth first types. But we know that flying is terrible for the environment, and transport is an increasing share of global emissions. Our current Net Zero Secretary, Ed Milliband, threatened to resign from Gordon Brown’s cabinet the last time a Heathrow expansion was seriously considered. It seems unlikely that in his current role, he would view the slightly nebulous probability of economic growth as more important than his own brief to reduce emissions.
Airport expansion also risks inflaming the North/South divide. Investing in South Eastern infrastructure has kicked Manchester Mayor Andy Burnham’s comms team into gear as they (rightly) lobby for greater infrastructure investment into the North of England. He has proved an admirably effective thorn in the side of previous Governments, and Westminster will no doubt want to keep him relatively placated.
All of this is to say that committing to growth in principle and in theory is fantastic. The academic debates around whether our strategy is coherent are useful and important, but ultimately strategy and theory have not been the major reasons that the UK won’t grow.
On Wednesday, we will see whether growth really is the primary mission of this Government. I personally won’t be looking for growth in a strategy white paper. Instead, I think growth will be found in the tangible announcements of a third runway, or a data centre or a nuclear power station approved.
*Sam Freedman, ‘Labour and the Challenge of Coherence’, Comment is Freed, 12 January 2025 https://samf.substack.com/p/labour-and-the-challenge-of-coherence.
Ben Ansell, ‘Grasping for Growth’, Political Calculus, 26 January 2025 https://benansell.substack.com/p/grasping-for-growth.
Aver Bhattacharya, ‘The Government Does Have a Coherent Strategy for Economic Growth – If Not a Holistic Theory’, Social Market Foundation, 17 January 2025 https://www.smf.co.uk/commentary_podcasts/the-government-does-have-a-coherent-strategy-for-economic-growth-if-not-a-holistic-theory/ .
Paul Johnson, ‘What Is the Government’s Theory of Growth? Nobody Knows’, Institute for Fiscal Studies, 20 January 2025 https://ifs.org.uk/articles/what-governments-theory-growth-nobody-knows.
Giles Wilkes, ‘The Government Needs Its Growth Explanation’, Freethinking Economist, 20 January 2025 https://freethinkecon.wordpress.com/2025/01/20/the-government-needs-its-growth-explanation.
