When Praful Nargund stood against Jeremy Corbyn in Islington North at the July general election, I heard several confident predictions about why the moderate and business-savvy candidate favoured by Keir Starmer’s ruthlessly disciplined machine would promptly see off Jeremy Corbyn – the Old Testament prophet of doomful state socialism in Islington North.
The head-butt of Labour centrist and remains of the old Left, re-invigorated by protests over Gaza, did not go to plan – Nargund is not in the Commons and Corbyn is.
That leaves a shiny Labour hopeful who has run businesses in IVF treatments (including selling lower-cost fertility treatments to the NHS) in the no-man’s land of high fliers who fail to nab a coveted parliamentary seat. Instead, he is setting out via the launch of a “Good Growth” foundation to provide research and advocacy for what an effective growth plan might look like – and whether this week’s budget will get us on the way.
The Nargund initiative caught my eye because for all the doleful pre-roll of the budget the definition of growth – let alone what would make it feel good or effective to most of us – has never been nailed by the new government.
On paper, it is simply a rising Gross Domestic Product (GDP) a measure of all the economic activity of companies, governments and individuals. It has largely been sluggish in the UK for many years, as the result of a quadruple set of shocks: the financial crisis, Brexit, Covid and the energy crisis after the invasion of Ukraine. These are far more powerful than missteps by Tory governments.
It is too easy to blame Liz Truss for lasting economic damage (it was a crazy budget and hiked interest rates, but the markets and rates corrected as soon as the Truss era ended, which was fast).
So simply selling tomorrow’s budget as an end to years of “Tory torture” will not address underlying issues.
To do that Rachel Reeves is doing one very substantial thing – changing borrowing rules to invest in infrastructure and green technology projects. But that is a long-term business. Electorates get tired of waiting for changes when they need clarity about purpose and outcome now.
Labour strategists are already anxious about a tax raid on many middle-class voters (as well as the rich), combined with slow progress on “fixing” an NHS which will require a far bigger efficiency and workforce upgrade than the funds allotted to Wes Streeting. But that can easily leave the government set for unpopularity.
On its output so far, the Good Growth Foundation aims not to fall out with the Reeves view of what the economy needs, which rather blunts the edge of some of its punchier research – a new piece of polling it has run shows “particularly strong support for borrowing to invest in infrastructure”. But it continues: “the public remains to be convinced on borrowing to invest in clean energy. Nevertheless, the majority of the public is supportive or open-minded to the idea.”
Or to put it more plainly, yes, people do still blame the Tories for the state of the economy after 14 years in office. Yes, they like the idea that borrowing is a silver bullet (which passes lightly over the fact that fully £104 billion is already spent on interest payments on government debt), but no, they do not so far buy the idea that investing in “clean energy” will materially change economic outcomes for the UK.
And on that, they are right. It is a very unproven move: climate friendly but expensive. The more immediate point is that ministers (including the prime one) are sending mixed messages on what sort of growth they want and how they intend to support it. IIf you kick off a government with a major employment rights push, a minimum wage rise and potentially tomorrow a hike in national insurance contributions for employers, it’s not obvious that the laser focus is pushing companies to grow. Other groups and interests seem to supersede this aim – so why would businesses feel the government has their back?
How does it view competition? It’s not a word which seems to fit the Labour lexicon. But in an era when AI and automation threatens many existing middle-income jobs, competitiveness means placing bets on supporting businesses where they have most chance of “agglomeration” – the multiplier effect of being close to each other. That is a boon to London and the South East – and growth tends to follow where success is already proven. That is however, a more challenging recipe for a party which has often spoken as if government should decide where jobs go, rather than businesses or investors.
These are the gremlins lurking underneath tomorrow’s Budget-day headlines. You can take more tax, shift investment rules, change borrowing criteria and pare some more pounds from a limited pile of non-doms, capital gains and other immoveable assets. But if Labour can’t get clearer on how it thinks growth will best happen and what that will take, beyond a few fancy investment summits, the result will be a lot of pain and a very thin gain.
Anne McElvoy is executive editor at POLITICO and host of the POWER PLAY interview podcast
