Did the conference speeches reveal an economic vision for the UK?

In his party conference speech, Chancellor Jeremy Hunt painted a rosy picture of our future leadership in technology sectors. His words didn’t match the scale of the economic challenge. In the Labour conference, Shadow Chancellor Rachel Reeves avoided the trap of major economic policy commitments, and her vision may be too pedestrian. Rod Dowler writes that post Brexit, COVID, Partygate and Trussonomics, comparing party conference speeches is more interesting than usual.

Every year we have party political conferences to inspire the faithful. This year, the stakes are higher than usual, as we emerge from the hangovers of Brexit, COVID, Partygate and Trussonomics. We find ourselves poorer than before, with no agreed way forward, but with a big choice looming in the imminent general election. Consequently comparing the performances of Jeremy Hunt, the current Chancellor, with the aspirant, Rachel Reeves, is more interesting than usual.

The Conservative conference has never been a venue for the serious discussion of economics. The big beasts of the party walk purposefully around, surrounded by a retinue of the young (mainly men), largely from right-wing think-tanks and public affairs companies. There are many stages providing for all tastes in conservative ideology. On one of these, Liz Truss flourished, gagging for a rematch after an unfair ref’s decision; on another was Jacob Rees-Mogg, peddling the charms of a flat tax – the best snake oil since Brexit. The performance of Chancellor Jeremy Hunt, therefore, should probably be viewed as light entertainment, more suitable for the family than the available darker options.

The blue and white colour theme of the Tory conference, along with the brisk blue-suited appearance of the young courtiers and the lean and chirpy demeanour of Jeremy Hunt, all conveyed a picture of confidence and optimism, supporting the conference slogan ‘Long Term Decisions for a Brighter Future’. If Jeremy Hunt thought this message was undermined by the messages about the cancellation of the Manchester leg of HS2, ten minutes before he spoke, he didn’t show it. The son of an admiral, he’s a steady team player.

A keen advocate of productivity, Hunt managed to cover all he had to say in just over fourteen minutes. He claimed that, after the latest ONS statistics revisions, Britain is, by no means, bottom of the class in economic performance. He painted a rosy picture of our future leadership in technology sectors. We are, he said, to the surprise of some in the business community, already the third trillion-dollar tech economy in the world. According to Tech Nation, this is true, but it is based on market cap valuations; it does not readily convert into benefits to living standards. His prescription for the future depended largely on reducing inflation, which he likened to a tax. He avoided discussing the energy crisis caused by Russia’s invasion of Ukraine and the increased post-Brexit costs of doing business with Europe, observing only that ‘the plan is working’. Presumably this is the plan to leave it to the Bank of England to tame inflation by raising interest rates? His next priority is to reduce the rate of increase in public sector costs. John Glen, Treasury Minister, will restart the process of reform by looking at public sector productivity – that of teachers, policemen, doctors and nurses. A civil service headcount freeze, sanctions on the work-shy, and an increase of the minimum wage to at least £11 per hour completed the package. These hardly matched the scale of the economic challenge. One assumes he decided that all serious efforts to improve the economy could safely be left to his budget in November, when he would have the stage to himself.

Rachel Reeves left nothing to chance at Labour’s Liverpool conference, whose banner called ‘Let’s Get Britain’s Future Back’. She was introduced and endorsed by Mary Portas, the charismatic retail champion. Portas couldn’t resist the request to scrap business rates and help small businesses and the high street. She predicted that Reeves, who would be the first woman Chancellor in 800 years, would also be the best. Portas did resist pitching her other great idea, reform of the 2006 Companies Act. Probably she is biding her time for rolling back this New Labour legacy, which has contributed so much to the financialisation of the British economy.

Reeves grasped the 800-year opportunity firmly, and told us six times that Labour is ready to serve, ready to lead, and ready to rebuild Britain. In forty three minutes, she, too, avoided the trap of any major economic policy commitments, to focus on the provision of economic security. In many ways, her job has been made easier by Liz Truss’s premiership. Whenever Prime Minister David Cameron ran out of plausible reasons to justify the plans or performance of his austerity government, he played his ace: ‘The Labour alternative spent all the money’ – as attested by a frivolous note from Liam Byrne, after Labour’s 2010 defeat. Liz Truss performs the same role for Labour: She is the true ideological leader of the Tories; her Kami-Kwasi budget of unfunded tax cuts crashed the economy in 2022, directly damaging lives and aspirations. This will linger in folk memory for at least a decade. By contrast, Labour would have iron discipline in avoiding playing fast and loose with public finances.

Thus Reeves’s prescription would major on economic security, with a service-oriented administration leading and building, within a framework of iron-clad fiscal rules, and with tax changes overseen by an independent OBR. Online tech giants, energy companies, and non-doms could all expect a higher tax burden. The previously announced VAT on private schools would help level the playing field between the state-schooled 93 per cent and the private 7 per cent. A war on fraud, waste, and inefficiency seems appropriate, given the abuses revealed about the billions spent on pandemic supplies. Cutting Ministers’ use of private jets, and the appointment of a COVID Corruption Commissioner will be popular; given the large sums involved, the Treasury could benefit significantly. Slashing the use of consultants is a good idea; ministers need to reflect, however, on whether this cost has arisen because of the, perhaps overenthusiastic, cuts to central government departments, leaving them bereft of the expertise needed to procure complex goods and services, and to control major projects. This will be especially important for a new administration wanting to pursue major cross-departmental missions.

Another important suggestion is the establishment of a National Wealth Fund. This will provide a source of investment in partnership with private capital in a planned ratio of 1:3. It is a similar approach to that of the highly successful German KfW bank. The problem for Reeves is that, right now, she is not the Chancellor; any firm allocation of future resources provides a hostage to every journalist who questions where cuts will be made to pay for it. Her key insight is that what business craves most is policy stability and professional planning. Changing regulations, such as the date of the phaseout of internal combustion engine cars or the dropping of incentives for domestic use of renewable energy, makes nonsense of personal and corporate investment decisions. For large businesses, investment planning is a multiyear activity; a dependable policy environment is worth more than a grant or subsidy.

It’s significant that both Hunt and Reeves start from the assumption that our future is now in jeopardy, and something needs to be done. This is a liability for Hunt, but one he wears lightly, in an administration for which the past is another country, and the future is an opportunity for others to make mistakes. For Reeves, it is an advantage which she exploits ruthlessly. Neither Hunt nor Reeves tells us much about their future expenditure plans, but Reeves, with a grasp of industrial sectors, business clusters, the real economy and the human consequences of economic problems, understands the psychology of economic planning. The legendary John Maynard Keynes would have recognised this, if not the monetarists and mathematical economists who followed him. She has a convincing formula for getting the ship back on an even keel, and for starting the engines again.

The icing on the cake for Reeves was a post-speech endorsement of her ideas by none other than Mark Carney, the well-respected ex-governor of the Bank of England, appointed by previous Conservative Chancellor George Osborne. A worry is that Reeves’s vision, crafted to be acceptable in the post-populist wasteland in which policy is now discussed, is too pedestrian. To release UK potential fully, new ideas will be needed. A richly endowed, creative nation like the UK will need an agile, confident, and technologically competent central administration, to effect an ambitious transformation of the country.

As a private company does, the Treasury may have to value ambitious investment projects in their balance sheet. Private sector corporate governance will also need to be reformed, to put employees, customers, suppliers, the community and the environment on equal terms with shareholders, who can no longer just focus on short-term wealth extraction. And the UK should again lead the world, in real progress in combatting global carbon emissions and providing international aid. But perhaps all that is too much to expect from party conferences?

This article was originally published by LSE Business Review.

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