What a Labour landslide means for the UK economy

Generating meaningful economic growth will be the defining mission for Keir Starmer’s new Labour government, but how will he go about it?

The new government will lay out many of its plans in the King’s Speech on the 17th July.

From the beginning, a big part of Labour’s pitch has been political stability.

The government will pass the Fiscal Responsibility Bill, which will ensure all the government’s major tax and spend decisions face scrutiny from the Office for Budget Responsibility.

It will publish a roadmap for business taxation, which lays out the levies firms will face over the course of the next parliament.

Starmer will also create Great British Energy and the National Wealth Fund, both of which reflect an ambition to take a more active role in the economy.

The National Wealth Fund will invest £7.3bn to accelerate the green transition and help Britain re-industrialise over the next five years. The Fund will be required to crowd in at least £3 from the private sector for every £1 invested.

Great British Energy meanwhile will be a public investment vehicle with initial capitalisation of £8.3bn. Investments by GB Energy will include wind and solar projects.

The ambition to intervene more in the economy is best seen in Labour’s plan to introduce a new industrial strategy, through which it will work in partnership with business.

The party’s manifesto said Labour would take a “clear-eyed” approach to supporting the sectors where the UK is globally competitive.

“Our approach will back what makes Britain great: our excellent research institutions, professional services, advanced manufacturing, and creative sectors, on the approach we will take to policy. In government, we will set out plans for these and other vital sectors of the economy,” it said.

The broad hope is the government will be able to remove barriers to investment, incentivising private sector firms to invest in the UK.

Lifting investment is a crucial piece of Labour’s growth mission because the UK lags behind international peers on both public and private sector investment.

One of the other major barriers to investment is an onerous planning regime. Labour will likely introduce reforms to the planning regime in the King’s Speech too.

“Changes to planning regulations and infrastructure plans will be quickly implemented,” Rob Wood, chief UK economist at Pantheon Macroeconomics said.

Starmer is expected to re-introduce mandatory housing targets for local councils and free up parts of the green belt to ensure the new government meets its target of building 1.5m new homes over the course of the parliament.

Analysts at Oxford Economics said “this aim is laudable, but delivering on these ambitions is easier said than done.” Over to you Sir Keir.