This is the Guardian. Today, Rachel Reeves versus the blockers, and the bats, the nudes and the nimbies.
Ministers from the United Kingdom are here in Davos, meeting with business leaders, pitching them on private investment in the UK. Joining us right now is Rachel Reeves, just the UK's Chancellor of the Checker. Good morning to you. Good morning. So the World Economic Forum in Davos is this crazy meeting, you know, resort in the Swiss Alps, snow on the ground. There's a particular sort of tech bro look that you get, you know, with the Chilean and the Genos and the very, very expensive looking shoes.
Rachel Reeves was in Switzerland last week to schmooze some of the richest and most powerful people in the world. And the Guardian's economics editor, Heather Stewart. There are scores of world leaders there and the heads of the International Monetary Fund, loads of big businesses. Along with the business secretary, Jonathan Reynolds, Reeves set out her stall.
They sort of turned out with a message really that Britain is open for business, that they're willing to move obstacles out of the way if you're a global business, to appeal to you, to make you think again about the UK. My message to US investors and global investors, too, is Britain is open for business. We want your investment. After the doom and gloom of Labour's first six months in power,
Reeves tried to strike an upbeat tone. There was even talk of, oh, we could do with a bit of Donald Trump's optimism. Don't often hear a Labour politician comparing himself to Donald Trump. Businesses often complain that it's too hard to build in Britain. She clearly wanted to get across this idea that she wants to be a chancellor who says, yes. Really going to make a choice this time between growth and net zero ambitions.
She was clear that the priority is economic growth above all else. Desenters be damned. Number one mission of this government is to grow the economy. You've already seen a number... Today, Reeves will give a speech setting out her big plan. But why is she determined to put growth above net zero? And does it really have to be that way? From the Guardian, I'm Helen Pitt. Today in focus. Rachel Reeves finally cheers up. But at what cost?
Heather, welcome back to today in focus. Can you start by just giving us a sense of the kind of pressure that Rachel Reeves has been under in the last couple of months? It's been very intense, I think. So they arrived in power. They spent quite a long time trying to establish the message that the Conservatives had left the economy in a real mess.
The government published its plans for day-to-day spending in the spring budget in March. But when I arrived at the Treasury on the very first day, I was alerted by officials that this was not how much the previous government expected to spend this year. It wasn't even close. In fact, the total pressures on these budgets across a range of areas was an additional £35 billion.
She said the public finances in a terrible state, I'm going to have to take some very difficult decisions. So that was when she got rid of the winter fuel allowance for most pensioners, which was one of the few very noticeable policies they announced in the first few weeks and months, I think. Then she gave her budget in October. We quite liked aspects of it because she focused on public spending. She was brave enough to raise taxes in order to pay for some of that public spending.
Certainly, in the next couple of years, the NHS, for example, in schools are doing reasonably well. However, she got absolutely hammered by business because Labour had promised in the election campaign that they wouldn't raise any of the major taxes, national insurance, VAT, all those. So she goes for employer national insurance contributions, which gets levied on companies. Ever since then, there's been this really noisy backlash from businesses about how anti-business she is. She's clobbering growth, she's going to raise inflation because they'll have to push up prices because they can't afford to pay this tax.
And there was just a sort of grim mood, really, that the plan she'd set out in the budget was already looking a bit wobbly, she'd upset businesses, and the growth figures have been really quite grim. So I think then was then, at some point, this sort of feeling they really needed to get the message home that they wanted to crack on, they want to generate some growth. And one way to do that is to sort of sweet talk the kind of people that were hanging about in Davos last week.
And so she's become a kind of Betnoir, hasn't she, for the right-wing media? She's got lots of unflattering nicknames suggesting that she's not up to the job Rachel from accounts, I think is one of them. But how fair is the criticism? How sluggish is the UK economy right now?
It's growing very slowly or barely growing at all. It's not expected to have grown at all in the second half of 2024, effectively. Although bear in mind, it's very hard to know quite how much of that Rachel Reeves is responsible for, right? The labor came in in July. Interest rates are still quite high. The Bank of England is quite worried about inflation. So interest rates, if you've got growth that low, you'd expect rates to be sort of tumbling down. Actually, they're still quite high, and that's
would absolutely be weighing on economic growth, whatever Rachel Reeves stood up and said. So it's difficult to separate what she's done from and any policies from what else is going on in the economy. But yes, it's pretty weak and it will definitely be worrying the government. And to counter some of the criticism that Rachel Reeves has been receiving, she is going to be announcing her new growth plan today.
But before we get to that can we, this is going to be very basic can we have a little bit of economics 101 because I realized when we decided to make this episode that you hear the term economic growth banded about all the time but what is it, what is economic growth can you just explain it for domains like me.
Yeah, of course. So there's this measure that economists use called gross domestic product, GDP. Yes, I've heard of that. Right. And that effectively, and there's lots of questions about what it counts and doesn't count, whether it's really the right measure and all that stuff, but it's been used for a long time. And it basically sums up everything that is
done and produced in the economy in a year. So what's bought, what's produced and it also includes the activity of public services for example. So what's going on in the NHS and the hope is that you get GDP to expand year on year because basically that's really the one way that you can make people's lives better and improve living standards and it's much easier to make people lead healthier, better lives, live longer, all those things if you're generating economic growth.
Part of the reason that a lot of people in the UK are feeling like their living standards haven't gone up for the last, whatever, 10 years, is that growth has been really stagnant. We've never really regained the trajectory of growth that we had before the global financial crisis. We had that big crash and we've never really kind of got back on that track and that's part of the reason a lot of people are probably feeling that, you know, their wages haven't gone up that much in real terms for a very long time.
So Rich Wiese has got this big speech today. What are we expecting it to say? Well, there's quite a lot of it has been trailed as you'll have noticed. But the overall message is she wants to clear out of the way all of the obstacles or lots of the obstacles towards growth and in particular all kinds of obstacles to investment. So if you look at the UK economy and you compare it to
other successful economies around the world. Business investment is very, very low here and it has been for a long time. So is public investment. But if you talk to economists about why is it that the economy grows so slowly here that we haven't managed to sort of get back on the perch from before the financial crisis.
They will say, weak business investment is a really key part of it. They are applying themselves to that problem. And as part of that, they're making a lot of noise about what they're going to sweep out of the way. And so some of the things they're going to sweep out of the way are regulation. So notoriously in the UK, it's very difficult to get approval for a new big factory or whatever, because the planning process is really slow. And they're saying, OK, we'll speed some of that.
up, it will make it harder for nimbies to object or for environmentalists to object. We will try and make some of those processes faster, which is one of those things that businesses notoriously complain about. Remember, Rachel Reeves has just come back from China, where somewhat different
political system obviously which we wouldn't want to emulate but you know of course in china you just get things built you don't have objections from people who are upset about their view or any of that you know you just crack on and uh the chancellor has talked about the fact that you know she sort of joked about the fact that hs2
And this notoriously drawn out ridiculously expensive project that's now not happening. And, you know, she sort of talked about traveling on high-speed rail in China and joking almost that we'd have had to build some sort of bat tunnel, you know, which is, of course, what happened. How much did it cost, 100 million quid or something? You know, she wants the UK not to be the country that is known as
always slow on infrastructure projects. So she said the government has spent a long time saying no to things and she sort of listed, oh, you could say no to things because of emissions or bats and nukes or any number of other things. Nimby's, she's really keen to show that she's going to sort of sweep all those things out of the way and she's going to allow businesses to get building basically.
but sort of making these remarks about the bats and the nukes talking so dismissively about people who are concerned about the environmental impact of economic growth. It just feels a bit beneath her. And also isn't it a bit tone deaf given that we're seeing every day the effects of the climate crisis, floods, fires, storms. And also wasn't this supposed to be the cleanest, greenest government and their economic plan was all supposed to be underpinned on creating a clean green economy.
To me, she was sort of almost oversteering or over-communicating out there in Davos in the heady mountain air because the particular audience that she was aiming at was not the environmentalist and it was not the sort of Miliband wing of the Labour Party. It was businesses and so she was very much trying to send that message but you're right, the truth is you can't choose your audience and you know sort of almost ridicule
environmental campaigners in one forum and not have that heard elsewhere. And there absolutely was that message, I think, of a certain sense of dismissiveness about some of these concerns, which, as you say, are becoming ever more pressing and more obvious every day. I mean, she would say that they are pressing on with lots of other green policies, so onshore wind.
the grid connections that you need to make that work, all these kinds of things that, you know, the sort of milli-band agenda, she would say, we're pressing ahead with that and we still have these sort of statutory carbon budgets. But yeah, certainly it cuts against some things that a lot of voters and a lot of labor voters, left to center voters, care quite a lot about, I think. So I do think they need to be quite careful here.
Yeah, definitely a lot of people care about the environment, they care about the Greenbelt, and they care about a cleaner future for their children, don't they? And one of the things that she's apparently going to announce today is building a third runway at Heathrow. It's something that Keir Starmer has opposed in the past. The Energy Secretary Ed Miliband has also been fiercely against it, Sadiq Khan, the Mayor of London remains vehemently opposed to it. And this is such an old...
such an old argument to have again. I was thinking like my first front page of the Guardian was in 2005.
And it was about a Heathrow third runway and the opposition to it. So we've been having this conversation for 20 years. Why is she picking this now? Why is she picking it up again? I think she's picking it up again exactly because we've been having that conversation for 20 years, because I think that's the point she wants to make. She wants to try and say, we are different because we're going to get this done. But I mean, I agree with you. It's an incredibly old argument. Times have changed. We're supposed to be transitioning to a post fossil fuel world. And it seems very hard to reconcile.
A lot has changed in terms of aviation. A sustainable aviation fuel is changing carbon emissions from flying. There's a huge investment going on on electric planes. And also, a third runway will mean that instead of circling London, flights can land at Heathrow. And sustainable aviation and economic growth go hand in hand. I think there is an argument that it would help economic growth, but if that's unsustainable, economic growth that contributes to
fossil fuel emissions that are burning the planet. It's fairly short term, isn't it? And she might be saying, oh, well, we're building for a sustainable future. Sustainable aviation is around the corner. It's not really around the corner. It's still a long way away. I mean, it's been around the corner for at least 20 years, hasn't it? But yeah, it feels quite difficult to reconcile with the thrust of being the sort of cleanest, greenest government ever.
Another thing that Reeve seems to be pushing for is less regulation of the city, which feels like something that she wouldn't have been arguing for on the campaign trail. Six months or so ago, does that set off alarm bells that she's going to be kinder to bankers?
I mean, as someone who covered the financial crisis, it's old enough to have covered the financial crisis. I had a front page in 2005, Heather. It does set off alarm bells with me, to be honest. I know there are arguments, some of the banks argue, I know that they are too restrained, that they're unable to sort of go for growth because of some of the restrictions that were put.
around them, you know, Rachel Reeves has given speeches calling the city the jewel in the crown of the UK economy and saying that we'd sort of gone too far, too cautious, too risk of us. Yeah, I do worry about it, Helen, to be honest, because it feels to me like there was a reason that all those structures were put in place after the crash. And that was because it was absolutely devastating. And it was very clear that, you know, you can't rely on banks
regulate themselves. You can't rely on the sector to restrain itself. It was a super successful sector in the economy and then it ate the economy effectively. So I felt very uncomfortable about that.
And this is part, I should say this is part of a wider issue about regulators. So one of the things she talked about in Davos was the fact that they had got rid of the chair of the Competition and Markets Authority, which is the regulator that has to approve when two companies want to merge. And businesses have been complaining to her. It's too stodgy. It puts up too many barriers. It's too anti-business. So this poor guy got sort of elbowed out. So that's, again, a symbolic
We listen, you know, business complains to us that something's getting in its way. We get it out of the way fairly ruthlessly. So again, this is all about this sort of messaging. And she's told all regulators. In fact, there are apparently there are over 100 regulators, which she told us in Davos too many. It does sound like a lot, doesn't it? But a lot of them, of course, are to do with
keeping food safe or protecting consumers or making sure that businesses treat their workers right and all those that will all of those are going to have to come back and say, this is how we're going to contribute to growth. Let's talk about housing. UK has got a major housing crisis. Labour has committed to building one and a half million homes over the next five years. Rachel Reeves has said she wants to cut the red tape around house building to speed up the process. What is she hoping to achieve and how realistic is it, do you think?
Well, I think, ultimately, they want to bring house prices under control. They want to make it affordable for people to buy a house. Younger generations, many of them are stuck with their parents. Yeah, and buying houses much later than previous generations. Labor wants to be the government that
sets out to solve that. So that's where this aspect of it comes from. But there's an economic growth bit of that too, which is about businesses and can they expand and where do their workers come from? If you can't buy a house, it's difficult to move around or if you're stuck in an overpriced private rental accommodation, it's difficult for you to move around to find the right job in the right sector.
get to work. So she's going to talk about, for example, making it easier to build around commuter stations. So if there's a bit of farmland around a commuter station, maybe you would establish that that was ripe for development. Even if it's on the green belt? Even if it's on the green belt. Yeah, because it's made clear it thinks that some green belt land will have to be.
built on. They say some of the sort of less good quality stuff that's, you know, not particularly great for nature. The grey belt, don't they? The grey belt. Where there's car parks and things that's officially. Exactly. Station car parks is the sort of classic. Build some flats on a station car park. Yeah, we need a station car parks that people can drive there and get on a
Well, I know, you know, I'm not saying there aren't contradictions involved, but I mean, the other question, apart from, you know, how upset people are going to be when they see blocks of flats coming up, you know, all over the place in fields, whatever, is, and whether the infrastructure is there for them and all that kind of stuff, is do we have the workforce? Is the construction sector have the workforce given that labor is quite keen to reduce immigration? We don't have free movement with the EU anymore.
Do we have the workforce? Can the sector expand rapidly enough to build all this stuff that Labour wants to build, which is a question hanging over before you even get to enraged voters? And will these houses actually be affordable? It costs a lot to build a house these days. Materials have gone through the roof since Covid.
I mean, the government would say they will insist some of it is affordable, but that's absolutely another question because they really want developers to crack on with this, right? And the developers, as we know, will always say, we can't make these homes affordable and make the project work. And do you want the project to go ahead or not? So that's going to involve a lot of hard-nosed negotiations, I think, a lot of it at local level. Coming up, when will we start feeling better off?
And it's not that the government isn't making a lot of announcements. They are all the time, pretty much every day. But I think to a lot of people, it feels quite scattergun, that kind of absence of a guiding principle. If you compare it to the Cameron and Osborne era, they have their austerity agenda. They have a terrible guiding principle. Well, but they had one. And the Blair first term, education, education, education, is there a coherent strategy here, do you think?
So I think there is, in a way, I think it's taken a long time for them to arrive at it, because as I say, I think they spent six months miserably treading water and telling us all it was grim out there and terrible. And they were going to have to make difficult decisions, difficult decisions. But I think there is a coherence to it. It's about raising workers' rights so that you don't have a sort of cheap skate economy where businesses don't invest in tech. They just employ a load of workers on crappy salaries and give them
useless job, so that's actually part of it as well. And it's about persuading businesses that have failed to invest in the UK economy for many, many years to be a bit more confident and to invest. So I don't think it's right to say there's no theory, there's no ideas. I think there are reasons why the UK has really weak productivity and Labour does seem to be willing to attack some of those.
I do worry about the idea that you just become the government that says, yes, to everything that businesses demand or to everything that wealthy individuals demand. So Rachel Reeves announced some little tweaks to her tax rules for what's called non-doms, wealthy people with roots outside the UK basically last week. And that was, she said she'd been listening to the non-dom community. I mean, they were sort of small changes, but it's slightly there. I don't think I-rolls really translate to audio only podcasts.
I can confirm that Helen rolled her eyes when I said that. But there was a risk and there are economists out there who point to that risk of rolling over in the face of everything that businesses wind about and sort of slightly losing sight of your sort of centre, I suppose. And all of this that Rachel Reeves is going to be talking about later today
Do you think that enough of it will have actually been built by the time of the next general election, which is like four years off now, four and a half years off? Will ordinary people feel the benefits of all of this? I mean, if we managed to get some economic growth,
probably yes, but I mean, in terms of actually seeing bricks and mortar things that you can, you know, lay your hand on, I think that's quite unlikely. Because we're not trying to wear a democracy and people get to judicially review every planning decision. Well, they were going to make that harder, right? That's running their announcements. But I just, you know, whatever the will is behind it, I just slightly doubt
And I think there are blocks too, right? The Treasury is very resistant, for example, to devolving more power to raise money to local level. Local authorities might be able to crack on with some of this stuff quicker rather than trying to keep your hands on all the levers from the centre. You know, there are reasons why this stuff just takes a long time.
You know, you do have to, although I've moaned about them being very pessimistic, they did arrive to this legacy of absolutely crumbling public services. You know, we've all come in touch with the NHS recently and how difficult it is and, you know, they've got a lot of other issues that they need to tackle. I imagine what they're hoping is that they're in a position where they can say, look, you can see the direction of travel.
where they can announce this company's coming in. These jobs are being created. This is how we're going to transform this. And so they can then paint a sort of optimistic vision and they can say, let's get on with the job. I think that's what they're aiming for. I don't think, are we going to be able to see sparkling new tower blocks before we go to the polls for the next election? I slightly doubt it. You can see what they're trying to do, which is have a great big sort of shiny arrow pointing in one particular direction.
Heather, thank you very much. Thanks, Helen. That was Heather Stewart, the Guardian's economics editor. You can read all of her coverage of Rachel Reeves at TheGuardian.com. And that's all for today. Today's episode was produced by Eli Block and Sami Kent and presented by me, Helen Pitt. Sound Design was by Joel Cox and the executive producer was Homer Khalili. We'll be back tomorrow.