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As expected, chancellor Rachel Reeves used Tuesday’s Mais Lecture, delivered at Bayes Business School in the City, to announce new policies – items notably absent from the Spring Statement earlier in the month.
Lem Bingley, PW editor
She gave a fresh account of her ‘securonomics’ vision for the UK – an interventionist approach first set out three years ago, while in opposition – which she said would see the government “making conscious and deliberate choices about the sectors we pursue, and in the capabilities we must protect or grow”.
The winners picked so far include artificial intelligence (AI) and quantum computing. The potential of AI is certainly huge – with a bloom of entrepreneurial activity already feeding through to rising workspace demand. Quantum computing is a much less certain bet.
On firmer ground, Reeves outlined the UK’s poor record on productivity growth, blaming it on “anaemic” capital investment, in part due to the “steady accumulation of complex new regulatory barriers”.
Pledges to simplify dealings with the EU, and get rid of duplicate red tape, struck a welcome positive note.
Other encouraging pledges include new “arrangements to strengthen and unlock housing development in the capital”, with a promise of further details shortly.
Robbing Peter to pay Paul is unlikely to encourage a new wave of investment
Beyond the M25, consultations on the first wave of new towns will begin soon, alongside a separate consultation on the creation of a development corporation for Oxford. Feedback gathering is already under way for one in Cambridge.
“I am doubling the government’s initial £400m commitment in Cambridge, making over £800m available for upfront land acquisition and infrastructure,” Reeves added – presumably evenly split across the two university hubs. She called for speedy progress in both areas.
“Where landowners are intransigent or insist on unreasonable demands, we are ready to acquire land using compulsory powers – either directly or [via] local leaders,” she promised. “I have asked the housing secretary to crack on with the work needed to deploy those powers.”
Reeves also set out new city investment funds with £2.3bn of funding “focused on major city regions in the North and in the West Midlands, giving established regional leaders control over long-term, self-sustaining capital […] backed by a commitment to business rates retention”.
Councils already retain a share of business rates, so the scale of envisaged change remains to be seen. More importantly, she has told Treasury officials to work with mayors and businesses on a roadmap for fiscal devolution, to be published with the next Budget.
The aim is to “give regional leaders control of a share of some national taxes”, starting with a portion of income tax. This fiscal devolution will be revenue neutral, Reeves pledged, and will represent “a permanent transfer of power and resources”.
Metro mayors will love that; taxpayers not so much. Fiscal neutrality doesn’t mean there won’t be winners and losers. After Scotland gained powers to levy its own income tax, in 2017, many found themselves paying a lot more.
As with the business rates rejig, robbing Peter to pay Paul is unlikely to encourage a new wave of investment.
For good or ill, more government intervention is on the way.