If the polls are correct - and the sheer size of the gap between Labour and the Conservatives in all recent polls suggests it - we should wake up on Friday to a Labour government. Three prime ministers and five chancellors on from the last general election in 2019 has created an air of chaos and disorder and I’m wondering if we are back to a 1997-esque ‘things can only get better’ moment?
Assuming a Labour government, what are Labour’s key economic policies, and what can Northern Ireland expect?
The biggest clue to Labour’s economic policy comes from a speech from the shadow chancellor Rachel Reeves in March. In this lecture, she played up stability as a bedrock of growth, perhaps mindful of the chaos of a recent past that gave us ‘Trussonomics’. The shadow chancellor is trying to push a new ‘onomics’ on to the stage – ‘securonomics’.
‘Securonomics’ reflects on how a lot of our recent inflation was imported because of our reliance on energy from elsewhere and seeks to build more self-sufficiency in energy and more secure supply lines for key items.
Securonomics is modelled somewhat on President Biden’s Inflation Reduction Act representing a more active state, building economic security, strength and resilience and focussing on an industrial policy that seeks to guarantee an ability to produce what the domestic economy needs, relying less on external forces.
Labour’s plan for the economy revolves around six points. These are:
- ·Economic Stability: Labour would introduce a new fiscal lock to avoid a repeat of the Kwasi Kwarteng budget. This will bind a labour government to having a current budget in balance and having debt falling as a share of the economy by the fifth year of any forecast period. Oh, and there will be a single autumn budget every year and the publication of a roadmap for business taxation, covering the duration of the parliament.
- Corporation Cap: Labour intend to cap corporation tax at its present rate of 25%. The aim here is to try and ensure that businesses can plan investment projects today, with the confidence of knowing how their returns will be taxed for the rest of this decade. As we know, there are still those pushing for a corporation tax reduction for Northern Ireland. We can do that if we want but the cost is proving prohibitive. Whilst it is unclear if Labour will reopen a conversation on funding our cut, I would guess they would not.
- Getting Britain building again: While this relates more to GB planning reform, it is motivated by a belief that housing and modern infrastructure are key to growth, a belief that might bode well for Northern Ireland when making the case for funds given our creaking infrastructure.
- Backing business: a new industrial strategy will aim to maximise strengths in life sciences, digital, creative, financial industries, clean power and automotive. A national wealth fund is intended too as a partnership between public and private funds.
- A skills revolution: more high-quality apprenticeships and training opportunities tailored to local needs. Again, this will be welcome rhetoric to our business community who are increasingly struggling to find suitable people for the jobs they have.
- Making work pay: a new deal for working people is in the offing under a Labour government. They intend to deliver a ‘genuine living wage’ and ban zero hours contracts.
Within these points, and from speeches by the shadow chancellor, there is a strong read across to our own economy minister’s economic objectives to create good jobs, promote regional balance, raise productivity, and reduce carbon emissions.
Of course, with swathes of our own economic policy devolved to us, the key point of interest will be whether Labour turn the spending taps on, from which we will get additional funding through the Barnett formula that can then be spent as our Executive decides.
The mood music regarding more spending does not appear favourable. In opposition, Labour have been at pains to show they are economically credible and so have essentially tied themselves to similar fiscal rules to the Conservatives. This means that any significant increases in spending will likely have to be afforded by a growth spurt that creates what we call ‘fiscal headroom’. That is not beyond the realms of probability, but the economy has been stubbornly lacking in growth over the past decade or so.
I don’t detect the same enthusiasm that accompanied the last time Labour came to power in those heady days of Brit Pop and ‘Cool Britannia’ but after such a prolonged period of uncertainty and instability, if whoever comes to power after the election delivers stability then things can only get better.
But regardless of who takes office, they will need a massive slice of economic luck to avoid making stark choices on spending and tax.
- Andrew Webb is chief economist at Grant Thornton
