The Treasury under a Labour government would “hardwire” raising Britain’s growth rate into its budget tax and spending decisions as part of plans to shake up Whitehall’s most powerful department, Rachel Reeves is to announce.
The shadow chancellor will use a lecture in London on Tuesday to say that a decade of national renewal must start with “day one” reform after a Labour election victory to make growth more pivotal to the Treasury’s work.
Rejecting calls from some critics for the Treasury to be broken up into separate economy and public finance arms, Reeves will say she wants to beef up its in-house enterprise and growth unit and for the first time integrate its work with the department’s tax and spending divisions.
“In 1997, the last Labour government established the enterprise and growth unit within the Treasury. Squarely focused on driving economic growth. It was a source of important policy ideas, including the reform of competition law and the creation of a longer-term science funding framework,” Reeves is due to say in the Mais lecture at City University’s Bayes Business School.
“However, as the Institute for Government noted last month, that unit is widely seen to be underpowered, its influence diminished compared to 20 years ago. And crucially it is not involved in the management of fiscal events.
“So, we will build on that success. Hardwiring economic growth into budget and spending review processes, with a reformed and strengthened enterprise and growth unit augmenting the existing so-called ‘fiscal triangle’.”
Labour’s election victory in 1997 was followed within days by Gordon Brown’s announcement of operational independence for the Bank of England, and Reeves will make reform of the Treasury part of her first 100-day agenda. Earlier this month, Brown said Britain would need to be put on an economic war footing if it was to break out of a vicious cycle of low growth.
The annual Mais lecture has become a set-piece event for economic policymakers to set out their worldview. In 2022, Rishi Sunak, then the chancellor, said he wanted to cut taxes “sustainably” and downgrade the role played by the state as an engine of growth.
In her lecture, Reeves will say Labour’s plan for growth is to be built on three pillars: stability, investment and unlocking the untapped potential of Britain’s workers.
“We need to do more to enshrine that core growth mission within our economic architecture,” Reeves will say.
She will call for the public and private sectors to join together in a national mission to restore strong economic growth across the country.
“When we speak of a decade of national renewal, that is what we mean. As we did at the end of the 1970s, we stand at an inflection point, and as in earlier decades, the solution lies in wide-ranging supply-side reform to drive investment, remove the blockages constraining our productive capacity, and fashion a new economic settlement, drawing on evolutions in economic thought.”
Unlike the 1980s, growth in the years to come must be broad-based, inclusive and resilient, Reeves will say, driven by planning reform, strengthening devolution and a new industrial strategy. She will promise to create half a million jobs across the UK through a new national wealth fund that will invest in the “industries of the future”.
A Treasury spokesperson said: “The Treasury’s role as an economics ministry is at the fore of what it does and particularly seen in recent fiscal events, with measures taken to increase labour supply and boost business investment. [The enterprise and growth unit] has expanded significantly over time, now under the direction of a director general.”
