Coffee House Shots
Can Labour deliver economic growth?
Get three months of the spectator for just three pounds. Go to spectator.co.uk/child. Hello and welcome to Coffee House Shots. I'm James Hill and I'm joined today by Katie Balls and Kate Andrews. Now, today's saw the first big speech by the new Chancellor Rachel Reeves, the first female Chancellor in History at Katie Eunferra last week. What did you make of her first big speech in office? In some ways expected because Labor has been talking about growth. We know that the manifesto sent a lot around growth, which is a convenient way of Kierstammer and Rachel Reeves not having to get into the detail of what might happen if as the IFS has pointed out some really difficult decisions coming down the track on spending and on public services. So if you can point to growth as what's going to suddenly emerge and allow you to have all this space to do the things you want and the promises you've made, great. And I think also it was quite clear that Rachel Reeves wants to wait until the autumn to have the budget. She is going through the OBR route. Not that it's trust-free. I think she always would have done, but particularly since Liz Truss, Labor wants to pitch themselves as the complete opposite of the Liz Truss regime and their first ability is the number one and you're not going to get, you know, there might be some small surprises, but generally they're not going for a shock and awe approach to government. If anything, they want to be very predictable, just in the sense of what they say they'll do, they'll do, maybe they're over delivered, they're lucky. And therefore I think it meant one of the things that they would do before we get to the autumn and start progress on very early on is planning reform and things they can get moving. So in her speech today, Rachel Reeves began that venture, ultimately saying that Labor would bring back mandatory housing targets. Now of course, these were lost under Rishi Sunak back when there was a Tory rebellion and Boris Johnson, I mean, even if we go a bit further back in 2019, had promised this huge shake of a planning reform. One of the majority in the region of Haiti, but he still had to back down because lots of his back branches wouldn't want it. Now, Qistama has a much bigger majority and I also think probably the Labor Party is a little bit more relaxed about this, generally speaking. However, it's still a local issue, you know, is planning can be something you think ideologically in terms of yimbi or nimbi. But when it comes to many MPs who have objections, it's often traced back to what their constituents think. And Labor have won in some interesting places where residents tend to, you know, you think about some of the places that we get longtime Tory now in Labor hands. So I think it was a sign of determination and an acknowledgement that this agenda is from the more divisive of the Labor parties. And therefore, you'll get it going early on for two reasons. One, because Qistama is rarely like to be more popular than he is right now. He, you know, is fresh from a huge victory for his party. All his MPs are incredibly grateful right now to him for delivering that. And the press, for example, you know, very keen to find positive things to say about Qistama. So are you ever going to have more political capital than now? And secondly, because if you are going to go for growth through a supply-side reform like planning, you need to get it going as soon as possible because it will take time. Of course, Kate, in one of the subsequent questions, Sky asked Rachel Reeves and said, you know, when were we going to start seeing the fruits of this growth? Is it going to be, you know, next year, two years, five years, 10 years? And I suppose what do you think is the likelihood of Labor getting this kind of pro-growth agenda, achieving the successes it's claiming for itself, given how important growth is to the overall Labor vision? Well, all of those answers may be correct. Generally speaking, growth is a medium to long term. Ambition, one of the ironies of the Tory party being in power for 18 years is if it had started on a house building agenda or a local infrastructure agenda in 2010, it might have actually been able to deliver that in 2023, 2024. And you would have seen those projects come online and said you had some grandstanding projects like HS2, which were way over budget that they had to partially axe. And you didn't get a lot of those regional benefits. But as Katie said, this is a local issue, a regional issue, and that can get really tricky. And over the next couple of weeks, as Labor announces it's planning reform, we're going to see just how far they're willing to go. They were talking about the gray belt, this idea that the green belt has managed to encapsulate so many areas that are not desirable at all, you know, use farmland, car parks that have been abandoned, nothing that you want to bring the kids to on a Saturday to run around. The idea that you would start going after those prime areas to properly build some homes. But the idea of building even on those kinds of fields and even on that kind of land is extremely controversial in local areas. And of course, you also have to pledge the infrastructure to go alongside it. So, you know, it's one thing to say we're going to build homes in a certain area, but are you going to build extra roads? Are you going to build another hospital? What else is going to go alongside of it? Now, you might have private developers more than happy to put the money into the homes, but is the stake going to build the roads to connect them? There's not a lot of money at the moment. I thought it was very interesting at one point though when Rachel Reeves was pushed on what kind of housing was going to be built. We need the private sector to build homes. We're not going to be in the business of building those homes directly. We need the construction sector, the house building sector to build those homes. And we have announced today the Deputy Prime Minister and myself some homes that have been stalled that will now go forward. We've also committed to look at those stalled sites. There's a wider number of stalled sites to see what housing we can take forward. But we're not going to let people off the hook. We want affordable housing and we want housing for social rents as well. I thought that was a particularly interesting answer because while she does go on to say we need affordable homes and use a lot of those taglines that are often associated with social housing, the strong implication here is that it's the private sector that's going to be building the homes. And the underlying point there is that more homes lead to cheaper homes, right? We have very limited supply in the UK demand is extremely high, outpaces supply, you increase the supply, you address some of the pricing issues, but she's really leaning into private sector development here. And this is part of a wider issue for the Labour Party is if they're going to find cash over the next couple of years before they potentially get the benefits of some of that growth, if they're able to implement those pro-growth policies, lots of it's if slots of caveats. But let's say they achieved it in the meantime, they need money from the private sector. It's not in the treasury coffers. And I thought that her speech today was deliberately aimed at business to try to suggest that the UK is perhaps becoming one of the better places to invest, not least because you see what's happening in France. You see what's happening in the US and she can at least for a short period of time almost be guaranteed to pitch stability to Katie's points. Very unlikely. We're going to see a lot of shakiness in the stomach government in the first couple of months, perhaps in the first year. And I think trying to get business to invest in the UK is going to be their number one approach, so that frankly they just have some money that they can say is being spent that isn't coming from what Rachel Ruiz has to balance. Yeah, I mean, the first day that Labour got elected to government, I think the headline on Bloomberg was pound rallies at the prospect of Labour government, and obviously a lot of that money coming in from France, so the kind of headlines that are new in coming government would kill for. Yeah, I think it went up by Pence, but the point is that it didn't collapse. And if we go back to the mini budget, I think it was Chris Phillips saying, you know, the sign of a good budget is a rallying pound, and we were watching it drop in real time, and you know, the quiet response from the markets is the one Labour wanted and they got it. And Katie, on another theme of Rachel Ruiz's speech as well, was talking about the economic inheritance she had from the Conservatives, and obviously suggesting it was worse than they previously feared. I mean, do you think this is going to be a key staple of Rachel Ruiz's rhetoric over the next kind of months, and particularly with that budget in October? Yeah, and again, partly in the no surprises of the Labour government, we had that in advance, you know, you had shadow ministers before the result claiming that they could not, you know, see the books or the full state of the public finances, and it could be even worse when they get in. Of course, you've never had more information available on the state of the public finances from the outside. So I think it's, you know, very much framing from the Labour point of view, and Rachel Ruiz saying things are very bad. I think the question is how long is Labour's honeymoon? Because there's lots of problems coming up the track, whether it is, you know, in terms of the lack of money. There's also, of course, questions on one of the things Kirstal has done early on, has said the Rwanda scheme is dead. But currently, if we look at the system, you know, Labour has not managed to answer the question of where they will send those who, you know, they cannot return to the country that they've come from. And that was when it came up in the debates during the election. We have not had the answer to that. And therefore, if we do have lots of people crossing the channel, if we have a situation where, you know, there is a lack of funding for something which people get very upset about, for how long can Labour blame the Tories? I think they've got a bit of a time on this. I think that, you know, voters will look at the inheritance and think, you know, you need to give Labour a chance. It's just quite hard to know what is it in six months' time? And people say, "Oh, no, no. Now you're actually in charge. So, you know, you've got to stop blaming the Tories." For now, it's less of a problem. But I think we can see with the growth agenda, I think we can see with West Treaty and its comments on the NHS, and also some of the questions that have been presented. So they're doing lots of things very quickly. I think any new government would do is try and build up a sense of momentum. But also it's because I think there was an awareness that you think about, you know, cigarettes, lists of government risks. There are a lot of crises that could erupt in the coming months. And how much, Kate, do you think this is going to be about an overall vision of kind of supply side social democracy? So the response today from some of the free market think tanks, some of this, trust his favourite think tanks, ironically praising the growth agenda and saying Rachel Rieser was right to talk about planning. I mean, how much more are we going to see kind of a Labour Chancellor embracing traditionally so-called free market measures? Well, look, I don't think that the goal of the past 72 hours from KSDama's government has been to appease or necessarily appeal to the free market right. But as it happens, I think a lot of what's been announced will be bringing some of those more classically liberal people not on board, but I mean, it's hard to criticize West treating when he stands up and says what the Tories refuse to say for 14 years, which is that the NHS does not fit for purpose. It desperately needs reform. It's hard to criticize anybody talking about the merits of building a lot more homes, which is something for all the reasons Katie pointed out. The Tories were afraid to do. Now, this is still rhetoric, right? Where literally days in nothing has been delivered yet, but it sounds relatively positive. I think it is smart for some as government to get a lot of that positive messaging out before you get to the autumn where they have not been very forthcoming about what we might see in a budget. There may well be tax rises that were not announced during the general election to try to balance out what could come those more difficult painful decisions, which, you know, I think will affect people on the left and the right, with a positive narrative now about growth, I think is a relatively smart thing to do. But yeah, it's it's it's days in. So the stuff actually has to be delivered. And to Katie's point, how long can you say that your inability to deliver it is just down to what happened before? I mean, I think labor will get mileage out of blaming the Tories. But equally, let's see how the conversations with the junior doctors and the British Medical Association goes, for example, if they manage to sort that out in a matter of a couple of weeks, that'll be a huge win for the labor government. If they don't, if strikes continue, it's almost as if the issue wasn't fundamentally party political to begin with, but there are really difficult decisions to make there. And there isn't the money, as Kiyastama has already said, for a 35% pay rise. So you know, those challenges are coming. We obviously haven't seen the challenges yet days in. The narrative is relatively positive. And if you do want growth, there are certain things you have to do. You have to liberalize the economy. You have to build things. You have to build something energy infrastructure housing. You have to build something. There's some obvious things they have to do. They're making positive noises. Thank you, Kate. Thank you, Katie. And thank you for listening to Coffee Our Shots. And if you'd like to hear coffee house shots recorded live, you can do so when we join by Jacob Reesmogg this Thursday the 11th. And you can get tickets for that at www.spectator.co.uk/live.