I believe in a better future for Britain. It is one where British businesses are world leaders and where the industries of the future are built in Britain. It is one powered by the contribution of millions of ordinary people, not based on wealth trickling down from a fortunate few. It is one where every child, wherever they are born and whoever they are born to, has the chance to get on in life. And if I have the chance to become Britain’s next Chancellor of the Exchequer, it is the Britain I am determined to build.
Our country has great strengths. We are the second largest exporter of services in the world, and home to Europe’s leading financial sector. We have some of the world’s most dynamic businesses, operating at the very edge of possibility in tech, life sciences, and our cultural industries, supported by universities that are at the frontiers of global knowledge. And all of this is built on the work of the talented and industrious people I meet every day as Shadow Chancellor. Speaking to them, hearing their ideas and witnessing their ambition and belief, I am optimistic about Britain’s future.
But over the past 13 years we have failed to reach our full potential. Our economy has stagnated, inflation has soared, and working people in Britain have suffered. The result is not just a series of lines on a graph. It is lower wages, rising prices, spiralling mortgages, hollowed out high streets, crumbling public services and higher taxes. Taken together, this amounts to the biggest fall in living standards in a generation. The result is hard-working people struggling to get by, let alone get on in life.
I believe that a good society can only be built on a strong economy. Throughout my professional life, I have sought to understand Britain’s economy, first at the Bank of England, then in finance and now as Shadow Chancellor, representing the people of Leeds West as a Labour MP.
In that time, the world has changed markedly. Two decades ago, when I left university and got my first job, western democracies enjoyed strong growth, rising living standards, and an open globalised economy providing cheap energy and goods. For many, though not all, it felt like a time of optimism, hope and progress.
Today, that has changed. We now live in an age of insecurity, with Russia’s invasion of Ukraine bringing this new era into sharp relief. Energy prices have risen dramatically, putting households under immense financial strain and threatening blackouts across the world’s richest countries. For the first time in a generation, inflation has soared and food shortages have left our supermarket shelves bare.
But this shock was not a one-off. The war in Ukraine is just the latest in a series of events that have been described as ‘once in a generation’. In 2008, we experienced the worst global financial crisis since 1929. In 2020, we fell victim to the worst pandemic since 1918. Now tensions are rising between two world powers, America and China, in a manner we haven’t seen since the fall of the Berlin Wall. Meanwhile, the arrival of new technology threatens to change the world of work just as the industrial revolution did two centuries ago.
Rather than stand tall in this new world, Britain is being buffeted by it. With each new shock to the global economy, we suffer more deeply and for longer than our international peers. This year, the IMF expects the UK to have both the lowest growth and the highest inflation in the G7. Meanwhile, we are falling behind in the global race for the jobs and industries of the future.
Thirteen years of Conservative government has left Britain weaker. Austerity starved the economy of the investment it needs to grow. Productivity stalled and has never picked up. Wages stagnated and left millions poorer. Even judged by its own aims – reducing the national debt – austerity failed: our public finances have got worse, with debt as a share of GDP now at the highest it has been in over half a century.
Austerity has been followed by years of instability and dysfunction, made worse by the Conservatives’ ideological approach to negotiating our exit from the European Union. Last year they dealt the hammer blow, crashing the economy in Liz Truss’s mini-budget, sending markets plunging, undermining already fragile business confidence and leaving millions facing huge hikes to their rent and mortgages. Today, we are left with their wreckage and the managed decline of Rishi Sunak and Jeremy Hunt.
The causes of Britain’s economic weaknesses run deep, however. For too long, Britain has been held back by two misguided models of economic thought.
The first error is to think that the state has little strategic role in the economy beyond removing barriers to free enterprise, correcting the occasional market failure and redistributing the proceeds of growth. That view was wrong forty years ago, when it was enthusiastically embraced by the Thatcherites, and it is wrong today. Government does indeed have a role to play in tackling market failures, but its role must go beyond that too. A modern state must be more active, making and shaping markets that are essential to a nation’s resilience and future prosperity.
The second error that persists among policymakers is the belief that the people and places that matter to an economy are few in number, and that a nation can rely on growth in just one corner of the country or a handful of industries. The result has devalued people and places, and wasted so much human potential. In the process, it has left our economy dangerously exposed to the shocks that emanate from this uncertain world.
Today, centre-left governments across the world are showing that another way is possible. The US Treasury Secretary Janet Yellen calls this new approach “modern supply side economics”. It is focused on building the economy’s productive capacity: its ability to make, do and sell things. Its guiding principle is the idea of contribution, with a nation mobilising all its resources– the human potential found in every town and city - to build a stronger economy. And it is underpinned by the concept of a more active state, one that is willing to act in the national interest, pursue national goals, and invest in building the capacity of the industries that will determine the nation’s success tomorrow – working in partnership with a dynamic private sector as it does so.
In this paper, I show how the same can be achieved in Britain. I set out a new business model for Britain that follows the ‘modern supply side’ approach. It is one that will make us stronger and more resilient in an uncertain world, and help us seize the opportunities of the future, like clean energy, artificial intelligence and life sciences. It is one that brings government and business together, developing a long-term plan for Britain’s industries that makes us a world leader once again. Crucially, it is one that draws on the talents and efforts of thousands of businesses and tens of millions of working people, in every part of our country. And it is one that rests on the principles of sound money and financial responsibility, so vital to ensuring businesses can and will invest.
The defining mission of the next Labour government will be to deliver the strongest sustained growth in the G7, with good jobs and productivity rising in every part of our country. This is undeniably an ambitious goal, but it is one we’re determined to meet. Economic growth is the only way we can increase wages, bring down bills, revitalise our high streets and fix our broken public services. And it must be generated and shared right across our country.
Achieving our mission will require new thinking about Britain’s economy. In a world where our adversaries may turn off the taps to energy supply or remove access to critical technology, Britain needs to be resilient. Our prosperity and growth will depend on securing the energy that powers our homes, the chips in our phones, the food we eat and the materials that make the buildings we live in. Sometimes, that will mean making more things in Britain. In other areas, it will require greater international cooperation, working with allies to secure supply chains we can trust. Today, other countries are forming new partnerships to do exactly this. Britain must not be a bystander.
Equally, we must seize the opportunities presented to us in a rapidly changing world. The transition to green energy and technology, for instance, holds the promise of good jobs for British workers. As we adapt and build homes for the future, there will be jobs for builders, plumbers and electricians. The revolution in wind energy will create jobs for engineers, scientists and designers. Frontier technologies, like battery technology and green hydrogen, will create new industries and new jobs entirely.
In this paper, I set out a new economic approach for Britain, learning the lessons from our past and building on the potential I see in every part of the country today.
Doing this isn’t just good economic sense. It is also morally right. For me, politics and economics have always been about values, and mine come from my family. My paternal grandparents were Salvationists. They left South Wales in the 1930s during the Great Depression, moving to England to find work in Kettering’s shoe factories. Visiting them as I grew up, I would volunteer in the Salvation Army shop. For me, there could have been no better model for hard work, for contribution, and for the conviction that we all have a duty to give back to our communities.
The contribution of working people all across the United Kingdom should be recognised, drawn upon, and rewarded. Today, ours doesn’t. In the past year, I have thought often about two young parents I met in Worthing. They were good people and they were working hard. Between them they held down five jobs, and yet still struggled to make ends meet, while juggling work and childcare. They could only spend half a day together as a family each week. Despite all their toil, their hope of owning a home had evaporated as house prices soared and mortgages got more and more expensive. Doing all the right things, they were getting nothing in return. They weren’t demanding a life of luxury. All they wanted was a home of their own, security and time for family. But they could feel it slipping out of reach.
This human story, all too common in modern Britain, is also an economic one. The link between hard work and fair reward has broken. The contribution of the majority has been undervalued and they have been overlooked.
Labour’s economic mission demands that every part of our country thrives and that we value the contribution of every person. It also demands that we do things differently. This paper sets out a new business model for Britain. It is one that will ensure that, in an uncertain world, Britain thrives – and that working people feel the reward.
MP for Leeds West and Shadow Chancellor of the Exchequer