LONDON: Rachel Reeves (pic) will lay out the new Labour government’s plans to spur private investment in her first major speech as Chancellor of the Exchequer later yesterday, as the party tries to ride the momentum of its landslide UK election win last week in a dash for economic growth.
There is “no time to waste” in lifting Britain’s growth rate, Reeves will tell an audience of business leaders in central London, pledging to “fix the foundations” of the UK economy, according to remarks sent in advance by the Treasury.
The crux of Reeves’s plan is to crowd in billions of pounds of private investment by creating new financial instruments that will stimulate demand from institutional investors, Bloomberg first reported before the election.
For months, Reeves has been working to spark investors’ interest in projects that are central to Labour’s growth plans, in areas including green energy, house-building and infrastructure.
Reeves will set out more details of those plans in the speech, according to the Treasury statement.
“Where governments have been unwilling to take the difficult decisions to deliver growth – or have waited too long to act – I will deliver,” Reeves is due to say. “It is now a national mission.”
Boosting the size of Britain’s economy is a critical aim for new prime minister Keir Starmer, who has said that lifting growth would mean his government wouldn’t have to hike taxes or cut public spending to balance the nation’s finances.
To be sure, economists doubt that Labour will be able to increase growth quickly enough to avoid having to make difficult decisions on tax and spending in their first budget in the autumn, where they’re forecast to face a £20bil (US$26bil) fiscal hole.
As part of Labour’s bid to attract private capital, former governor of the Bank of England Mark Carney has been leading a task force advising Reeves on the creation of a national wealth fund.
Carney’s task force, which includes Aviva CEO Amanda Blanc and Barclays chief executive CS Venkatakrishnan, will report its findings today, according to a person familiar with the matter. Carney is the chair of Bloomberg Inc’s board.
Reeves and Starmer’s big focus on using private funds harks back to the last Labour government in the late 1990s and early 2000s, when under Tony Blair and Gordon Brown, private finance initiatives and public-private partnerships were expanded.
Those so-called PFI projects came to be seen as highly controversial because of questions over their value for money, the quality of privately delivered projects and arrangements used to keep debt off the government’s balance sheet.
Labour has also said it will stage a global investment summit in its first 100 days in office, and has been holding meetings with what it calls its British Infrastructure Council to discuss with UK-based and international investment firms how it can unlock private capital.
Attendees of the meetings have included representatives from BlackRock, Lloyds Banking Group, Santander, HSBC, Phoenix Group and Fidelity International, among others.
“It is absolutely right that we want investors to come alongside that government money,” Starmer said in the final televised debate before the July 4 election.
“We’ve been talking to global investors for the best part of two years, saying that if we put down this money set out in our manifesto, if you come alongside it and put down many more billions of pounds, so that in partnership with the government we can make the changes we need.”
Reeves’s big economic pitch follows a busy weekend of activity for Starmer’s new administration, which has sought to convey a sense of urgency and action since winning the July 4 vote.
Starmer this week will head to Washington for the annual summit of the North Atlantic Treaty Organisation, giving him a chance to meet face-to-face with world leaders including US President Joe Biden, Ukraine’s Volodymyr Zelenskiy and Emmanuel Macron of France for the first time as prime minister.
Today, Britain’s Parliament will return after the election-enforced prorogation, with hundreds of new Labour MPs taking their seats. — Bloomberg
