Good morning, George here.
The end of the party conference season means that attention is turning swiftly to the Budget on 30 October. Below I explore the political and economic challenges that Rachel Reeves faces.
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What theme will define this autumn? No 10 knows what it wants the answer to be: investment.
As well as Kemi Badenoch’s decision to pick a fight with mothers and Robert Jenrick’s decision to pick a fight with the armed forces, aides were struck by how little attention this issue received at the Conservative conference. “They had no argument over the lack of investment that has left the UK unprepared for economic opportunities,” one told me. Strategists eye a potentially potent dividing line.
It’s one that was established by Rachel Reeves’s Labour conference speech in which she declared: “Growth is the challenge. And investment is the solution.” On this, No 10 and No 11 are aligned (a contrast with some previous administrations). Recall that Keir Starmer has long argued for the principle of borrowing to invest for both economic and social reasons.
In her speech, Reeves paved the way for a revision of her fiscal rules to free up billions to invest in transport, green energy, housing and prisons. The Chancellor is widely expected to exclude the losses to the Treasury from the Bank of England’s quantitative easing programme (freeing up around £15bn). More radically, she could adjust the debt rule to account for state assets – such as the student loan book and NatWest shares (raising around £50bn) – or exclude new institutions such as the National Wealth Fund and the publicly-owned GB Energy from the government’s balance sheet.
It’s a necessary shift if Labour is to deliver on its mission of boosting economic growth. Remember that based on current plans, public investment is projected to fall from 2.4 per cent of GDP in 2024-25 to just 1.7 per cent in 2029-30. Dani Rodrik, the Harvard economist who influenced Reeves’s “securonomics” agenda, told me earlier this year that public investment of 3 per cent is “an absolute minimum for a country like Britain and that’s because so much of the public sector infrastructure outside of London is so in need of investment”.
But there are risks as well as opportunities for Reeves. First, having raised political expectations of a shift in investment, she must now match words with deeds. Second, she must maintain the confidence of the markets. While the Truss debacle has proved a political gift to Labour, it was also a warning – there are hard limits to UK fiscal policy (some investors have warned they will only tolerate £10bn to £20bn of extra borrowing).
This, incidentally, is the defence that senior aides make of Labour’s most contentious decision: the winter fuel payment cuts. To gain the permission of markets to borrow to invest, they argue, it is necessary to bear down on day-to-day spending.
At a Conservative fringe meeting earlier this week, Michael Gove declared: “One of the things that has been revealed over the last few weeks is that Labour doesn’t have a political economy of its own”.
Reeves, unsurprisingly, would dispute that. And as time goes on, the government’s choices are becoming clearer. On infrastructure spending, public ownership and workers’ rights it has positioned itself to the left of New Labour; on welfare spending it has positioned itself to the right. The question now is whether the Budget can deliver the political boost the government needs – and the economic boost the country does.
George’s picks
Andrew writes on the human cost of Israel’s military victories
Clive Martin explores the rise of “Conspiracy Britain”.
Rajan Menon asks if Iran is heading for regime change.
Janan Ganesh on why the rise of China isn’t uniting the US. (Financial Times)
Did you know the chances of surviving a cardiac arrest decrease by up to 10% for every minute that passes without CPR? Sky Bet is teaming up with the British Heart Foundation to make a difference by encouraging 270,000 people to learn the lifesaving skill over the next year. Sky Bet is also pledging £3 million to support the charity’s vital work. Take time-out to learn CPR in just 15 mins at bhf.org.uk/revivr
Mailshot
BBC: Biden opposes any Israeli strike on Iranian nuclear sites
Guardian: Kuenssberg cancels Johnson interview after sending him her notes
Sky: Melania Trump defends abortion rights in upcoming memoir
Kingsley, Schmitt & Bergman: Israel may be ready to risk all-out war with Iran
Ruth Marcus: The dangerous brilliance of JD Vance
Rose Horowitch: Revenge of the office
Katherine Harloe: The last generation
Joshua Rothman: Does anyone really know you?
And with that…
My thanks to Sydney Diack and George Monaghan.
Have a great day, Will Dunn will be with you tomorrow.
George — @georgeeaton
Kemi Badenoch was however one of the few politicians to centre women and mothers in her policies, and to focus on the fact that women - and only biological women - are adult human females.
The Labour Party is still not fully committed to this objective truth. David Lammy believes men can grow a cervix, for God's sake. Annaliese Dodds bends over backwards to accommodate men with fetishes in the female category.
There is an almost complete silence in the media about this, but we women know that our hard-earned rights are being dismantled. And yet if we point this out we are labelled right-wing bigots.
Men are barely affected by this and are evidently completely blind to it.