As MPs and their staff prepare to return to Parliament, the political pressure on Keir Starmer’s Government to deliver economic growth is ramping up.
With inflation, unemployment and the cost of government borrowing all rising, the political fundamentals aren’t looking favourable.
As Labour approaches the party conference season and what is shaping up to be a make-or-break Budget, ministers have three main audiences in mind: party members, the voters, and the debt markets.
Each of these audiences will need to be convinced things can and will get better.
This is the backdrop to the Prime Minister’s agenda for the autumn.
Reports over the summer that Chancellor Rachel Reeves is planning a shake-up of council tax or scrap stamp duty, alongside a second major push on planning liberalisation, suggest she is looking for a sweet spot that offers something for those three audiences.
The Government’s first Planning and Infrastructure Bill, when assessed by the Office for Budget Responsibility earlier this year, was forecast to have the potential to add nearly £7 billion in extra economic growth, increasing GDP by a full 0.4% by 2034/2035. Media reports indicated that a second bill could go even further to cut the red tape and lower the risk of judicial review faced by major infrastructure projects.
If ministers want to point to new large-scale transport and energy projects that will increase productivity and lower power bills, they know they need to do more to make them easier to build.
Further moves on planning may also have a secondary benefit for the Chancellor. If the OBR verifies that a new bill would be likely to increase economic growth in the future and then forecasts higher tax revenue as a result, the measure could give the Chancellor more fiscal headroom and help her meet her tight fiscal rules.
New legislation would not only help build market confidence in the UK’s growth prospects but, by speeding up major projects, could also increase the chances that voters across the country start seeing more investment in communities, more signs of building and renewed economic activity before the next general election. Number 10 strategists know the political power of investments that voters can see in their own community.
Alongside a move to speed up big projects, the Government will also be focusing on “investing in place”, celebrating and highlighting specific local investments around the country and seeking to make the impact of new investments visible to voters.
Ministers have already announced a specific fund to invest in local amenities around the country. The growth theme will also run through US President Donald Trump’s state visit to the UK in September. The Prime Minister will attempt to walk a diplomatic tightrope in his engagement with the President; looking to secure further investment from American companies in the UK’s infrastructure, technology and energy sectors.
Reeves’s storytelling over the next few months is likely to emphasise that, after years and years of low productivity, the fundamental engine of growth in Britain is broken and that she has a plan to fix it. Demonstrating to the markets that she has that plan is likely to be the key to regaining lender confidence, while delivering in a way that improves living standards is the only way to show the public there is a path through the cost-of-living crisis.
Growth has long been the number one priority for this Government. But as the political situation becomes more difficult, the next few months suggest accelerating that growth will become more important than ever.
