Britain’s Finance Minister Rachel Reeves said on Monday she had begun the task of unblocking infrastructure projects and private investment as part of a new “national mission” to drive economic growth after her Labour Party’s landslide election victory.
As the centre-left party takes power for the first time in 14 years, Reeves and Prime Minister Keir Starmer met over the weekend to agree on first steps to show they were moving quickly to tackle deep-seated problems and reignite growth.
Britain’s first female finance minister said “there is no time to waste” as she pledged to tackle the shortage of new homes and speed up planning approval for infrastructure projects, including more wind farms. She also made a pitch to investors who have shunned the UK since the 2016 Brexit vote triggered political turmoil.
“After 14 years, Britain has a stable government — a government that respects business, wants to partner with business and is open for business,” the former Bank of England economist told an audience at her Treasury department.
“In an uncertain world, Britain is a place to do business.”
Reeves and Starmer face one of the toughest to-do lists of any incoming government, needing to drive growth to help finance increased spending on public services without breaking a pledge not to raise the main taxes paid by working people.
They have little room to manoeuvre: living standards have stagnated since 2010, public debt is at almost 100 per cent of national economic output and tax as a share of GDP is on track to rise to the highest level since just after World War II.
Reeves said the government would reintroduce house-building targets for local councils after the previous Conservative administration scrapped them and help beef up local planning teams to get projects under way to address long-standing failures to build enough homes.
“We will not succumb to a status quo which responds to the existence of trade-offs by always saying no, and relegates the national interest below other priorities,” she said.
She also said the government would end an effective ban on onshore wind farms, encourage pension funds to drive investment in British businesses and prioritise unresolved planning decisions.
Reeves said she had ordered an assessment of the state of the country’s “spending inheritance” and would present the results before parliament’s summer break, before holding a full tax-and-spend budget later in the year.
POLITICAL INSTABILITY
Britain needs to win back the confidence of international investors after many were put off by the political instability that took hold after the 2016 vote to leave the European Union and the five prime ministers in eight years that followed.
Inward foreign direct investment has fallen in four out of the last five quarters, according to the latest official data.
“Investors in New York or Hong Kong would have read the headlines and found it easy to say ‘why bother?'” said Toby Gibb, head of investment solutions at fund manager Artemis. “What (the election) does is relieve that uncertainty – it allows overseas investors to invest with more security.”
Amanda Blanc, CEO of insurer Aviva, said investors wanted to invest in Britain but needed the government to set the priorities, overhaul the planning system and to co-invest in risky areas to boost confidence, such as hydrogen or nuclear.
“If the government invests there, then we can step in behind them,” Blanc told Reuters shortly before the July 4 election. “There is plenty of money.”
Housing has long been a fractious issue in Britain, with some voters opposed to plans to build in leafy, rural areas, and others crying out for an increase in supply to bring down the cost of buying or renting a home.