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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is the chancellor. You can read shadow chancellor Rachel Reeves’s opinion article here
All elections are a judgment about the past and a choice about the future. So let me address both. No judgment about the past can possibly be fair without reference to the three giant global shocks we have suffered in the past 14 years — the recovery from the global financial crisis, a once in a century pandemic and a 1970s-style energy shock. Yet despite these, since 2010, the UK economy has created nearly 800 jobs every single day, grown faster than any large European economy and attracted more greenfield investment than anywhere except the US and China.
In the last two years we have delivered a soft landing for the economy, despite 11 per cent inflation at the outset and the Bank of England predicting the longest recession in a century. The IMF now says the UK will grow faster than France, Germany, Italy or Japan in the next six years.
But we still need to unlock faster growth. There is no disagreement between Labour and the Conservatives on that — the question is who actually has a plan to deliver it? All Labour has talked about is planning reform. I actually agree — in fact, I announced some major steps in the Autumn Statement to speed up the approval time for business planning applications. But any economic plan needs to be about much more.
Take labour supply. Post-Brexit, outside the single market, you can’t say you want to be the “fastest growing G7 economy” without saying where companies will find the workers they need. Labour has not talked about that at all. But in just 18 months, I have put in place wide-ranging plans to attract six million adults of working age back into the workforce. For parents, we are introducing childcare from 9 months; for older workers, we abolished the lifetime pension savings allowance (opposed vigorously by Labour before a recent rethink).
We have toughened sanctions for those who are unemployed and not co-operating with efforts to find work; and our Back to Work programme will help one million people over the next five years with measures such as talking therapies. Most of all, we have cut National Insurance contributions: a pro-growth tax cut which, according to the OBR, will help to generate the equivalent of 200,000 people rejoining the labour market — enough to fill around a quarter of current vacancies.
Or take productivity, a long-standing issue for the UK. Our biggest single tax cut is, ironically, our least headline-grabbing. Full expensing for capital investment was described by the CBI as “game changing” for Britain’s chronically low business investment. Alongside the super deduction, it has meant that since 2020 the UK has had the biggest growth in business investment in the G7 outside Italy. This was one of 110 growth measures in the last Autumn Statement, which should close up to half the business investment gap with France and Germany over the next decade.
Then there’s our future growth model. I said in my first Autumn Statement that our opportunity was to become the world’s next Silicon Valley. And so it has proved. We now have the third largest tech ecosystem after the US and China, double the size of Germany’s and three times that of France. Our life sciences sector saved more lives globally during the pandemic than that of almost any other country. Our creative industries are now by far Europe’s largest.
All that success in innovation industries is only possible because, outside the US, we have the most respected universities and the biggest financial services sector — something we have strengthened further with our spin out strategy alongside our Edinburgh and Mansion House reforms.
So let’s move on to the choice about the future. Labour talks about stability, hoping to remind people constantly of what went wrong in the mini-Budget of 2022. But the truth is that Rishi Sunak and I have delivered that stability. What we need now is something more: ambition and a coherent plan to unlock our extraordinary potential. That is something about which Labour has precious little to say.
An even bigger choice is on tax. Cut through the fog of electioneering and this is the most substantive difference between the two parties. Having put up taxes to pay for the pandemic, Conservatives want to bring them down again whereas Labour will increase them still further. Why does this matter for business? Because if you look around the world, the most successful economies tend to be where taxes are lower. Economists argue about cause and correlation but most business people know there is a causal link: lower taxes mean a more vibrant private sector with higher levels of investment.
But if you want lower taxes and good public services — as both parties do — you have to explain how to live within the current very tight fiscal envelope. Our plan is straightforward: to ask the public sector to make 2 per cent productivity efficiencies every year. In the Budget I agreed to give the NHS £3.4bn to overhaul its IT systems in return for signing up to a 1.9 per cent annual productivity commitment. And if the NHS can do it, so can everyone. With its public sector union backers, we have heard nothing about this from Labour. They weren’t even prepared to fund an increase in defence spending to 2.5 per cent of GDP by reducing the civil service to pre-pandemic levels, hardly an unreasonable ask.
To govern is to choose. We have not always got things right. But we have been prepared to be unpopular when it was the right thing for the UK economy. The trouble with Labour’s ‘Ming Vase strategy’ is that difficult decisions get ducked — and the progress we need to make to improve our productivity and growth does not materialise.
That would be a tragedy because our economy has the most phenomenal opportunities. The UK is a very underpriced share right now which makes investing here a great buying opportunity — but only if we have a Conservative government willing to take the necessary tough decisions.
