A surge in gloomy UK economic data this month gave Chancellor Rachel Reeves “permission” to pursue a more aggressive growth agenda, according to senior government officials, upsetting labor sentiment and putting her on a war footing with regulators.
The chancellor will deliver a “growth” speech next week against a backdrop of a stagnant economy, recent turmoil in bond markets and on Friday a poll showing Businesses in the UK are cutting jobs At the fastest pace since the financial crash, barring a pandemic.
Reeves, who wants to speed up a number of flagship investment projects, colleagues said had decided after her recent fling at the hands of markets and political opponents to move “faster and further” to continue growth.
“In the treasury, the point of view is that everything is fine,” said one minister. “This is seen as permission to go harder on growth measures.”
An ally of the chancellor said: “She is frustrated with the speed at which things are happening. She wants to use the power of the Treasury to show where we want to go next. These are politically contentious things.”
For example, Reeves, who attracted conservative criticism for visiting Beijing this month, is pushing for fast fashion company Shein to list in London, despite concerns about standards at its factories in China. It also supports the expansion of Heathrow Airport.
Market turmoil at the start of the year led to claims that Reeves’ job was on the line, but her supporters say she used the episode to respond with “strength and determination”. She said that this month she will be happy to be known as “Iron Chancellor”.
Conservatives, however, say this is ridiculous. “It is clear that the workforce are out of their depth and out of ideas that the economy is growing,” said Andrew Griffith, the shadow business secretary. “Working people are paying the price for Labour’s war on business.”
Griffith notes that for all Reeves’ deregulatory talk, he will impose a raft of new employment laws on businesses, which the Government estimates Cost of business £ 5 billion.
But Reeves – who discussed Britain’s economy at the World Economic Forum this week – has shown in recent days a willingness to use the power of his office to take decisive action across Whitehall, some of which have been privately applauded by Tori.
Ministers this week kicked out Marcus Bokkerink as chairman of the Competition and Markets Authority, the monopoly regulator that has been criticized for alleged growth.
His departure was a signal to other regulators that they must work harder to spur growth, according to Treasury officials. “Sometimes a message has to be sent,” said one.
Reeves’ focus on boosting regulators has received private admiration from the opposition. “We should have done it ourselves,” said one former Tory treasury secretary.
Still, while some Tories are privately approving, Reeves’ actions have run afoul of some on her side of the aisle. She was accused by former shadow chancellor John McDonnell of leaving the door open for critics to say the paper “defended corporate abuse and profiteering”. Another senior left-wing MP said: “It’s desperate.” It seems, however, pleasant to make such enemies.
The chancellor too on the banks’ side This week in a Supreme Court case which will determine whether they should pay out potentially tens of billions of pounds if they make amends in a motor mis-selling case. A new tax regime that is not at home has been relaxed.
Next week, Reeves is also expected to sign her support for airport expansion in the South East, including Heathrow, despite fierce criticism from the green lobby and London Mayor Sir Sadiq Khan.
Whitehall insiders believe Reeves leaked the move to bounce off his cabinet colleagues; Sam Starmer previously voted against a third runway at Heathrow, while Ed Miliband – who has threatened to resign from Gordon Brown’s government over the issue – this week played down any suggestion he would back down. In the meantime, judicial reviews of disputed infrastructure projects will also be reduced.
Given the threat to stagnant growth posed by her precarious fiscal plan, Reeves told the Treasury to stop focusing on budgets and focus on boosting investment.
Officials are working on a range of projects – some with fruit-related code names – to invest in Britain.
One relates to the massive new Universal theme park Proposed for a site near Bedford, officials close to talks between the company and the Treasury said they were “progressing well”.
Backers of the project claim it could create as much as £50 billion in economic value in the first 20 years. The Treasury has been asked to provide financial support, including upgrading the M1 motorway and building a new station.
One official briefed on the talks, dubbed Project Mandarin, said they were almost complete: “It’s one of those negotiations that you could conclude if you wanted to.” Another person familiar with the talks added: “It’s very close. It’s almost there, but it’s not there yet.”
Officials said the support package focused mainly on guaranteeing infrastructure investment and improvements, which will be crucial to carrying thousands of people traveling to visit the 500-hectare site.
Executives at Comcast – whose Universal Destinations and Experiences are behind the scheme – have previously told the FT they want to build “one of the biggest theme parks in the world”.
Universal Destinations and Experiences said: “We continue to have productive discussions with the UK government.”
As well as the theme park, Reeves is also trying to finalize negotiations with AstraZeneca to revive the stalled vaccine manufacturing site in Speke, Merseyside.
The project stalled after the Treasury sought to reduce the amount of government support given to the UK pharmaceutical company’s Vaccine Centre, reducing the pledge made by the last Conservative administration from around £90m to £40m.
Meanwhile, Reeves is also expected to signal her support for a £9bn motorway and tunnel across the River Thames in East London, which would use private finance to defray the cost to taxpayers.
There are also signs that the government is hoping to avoid any criticism that it is focusing all its firepower on the south-east of England.
The Treasury has announced plans to review the “green book” it uses to assess the value of proposed investment decisions, long a focus of the IRE from critics who believe it favors London and the surrounding region.
He also promised to build a pipeline of investment projects outside the Southeast, with the help of the Office of Investments. The Reeves are looking closely at northern mayors, who were ruled by the government when it first took office.
