There was much in Rachel Reeves' Mansion House speech last night that was neoliberal to the core. Except for the fact that Rachel Reeves clearly presented it, anyone might have assumed that George Osborne was back in Number 11.
The tone was set by this previously leaked claim:
Regulation still acts as a boot on the neck of businesses… choking off the enterprise and innovation that is the lifeblood of economic growth.
It is hard to think of a more explicit statement of neoliberal orthodoxy than this. The Chancellor stood at Mansion House and told us that the real problem in our economy is not inequality, low pay, collapsing public services, or the failure to tackle climate change, but that regulation – apparently – is strangling our entrepreneurial spirit. In her words, it's a “boot on the neck” of business.
As a result, she made clear that, in her words:
we must regulate for growth and not just for risk.
This phrase should ring alarm bells. It means putting the interests of capital formation ahead of social, environmental or consumer protections. It means rewriting the rules to suit investors, whatever the broader cost.
Then she argued that:
there is nothing progressive ... about a government that simply spends more and more each year on debt interest, instead of on the priorities of ordinary working people.
In doing so, she tied the hands of this government. By declaring high debt to be evil without suggesting that obvious steps explored on this blog over time to reduce this cost (cutting Bank of England-based rates and using tiered interest payments on central bank reserve accounts) might be taken, and instead committing to her "non-negotiable fiscal rules,” she locked Labour into austerity. It is quite literally impossible to have adequate public services when debt reduction is the religion of government.
Her narrative was very different when it came to financial services. They were, she said:
at the heart of this government's growth mission.
She added that "putting pounds in the pockets of working people” depends on letting financial firms thrive.
This is classic trickle-down economics. The argument is that if only finance is made richer as a result of deregulation, somehow wages will rise. Experience tells us the opposite. Economic logic also tells us the opposite. Financial services do not generate wealth; they merely reallocate it at most, with a (usually significant) margin having been extracted along the way by those making the financial services arrangements. Reeves, somehow, confuses that top slicing with wealth creation, when it is usually nothing of the sort.
Reeves also suggested that the government has “ripped up the planning rules” and “swept away regulations.” The implication is obvious. This is not careful reform; it is a carte blanche to weaken protections for communities, workers, and the environment, all in the hope that someone, somewhere, might build a new office block or luxury flat.
On green policy, the picture was even starker. Having consulted, she said she had decided:
not to pursue a green taxonomy.
This means that she has effectively abandoned the idea that I have long supported with my proposals for pensions and ISA investment reform, of establishing consistent standards to guide investment into sustainable projects. Instead, she promised vague “transition finance” rules, a loophole-ridden concept beloved by lobbyists.
On banking safeguards, what the Chancellor has to say was as worrying as she trumpeted rolling back core banking safeguards. In particular, she welcomed lower capital requirements that make banks more vulnerable to failure, and which will increase the risk of bailouts being required when the inevitable crash comes. It is as if her goal is to replicate 2008.
In the end, she wrapped it all up by urging:
regulators in other sectors… not to bend to the temptation of excessive caution… but to boldly regulate for growth.
In summary, growth for growth's sake is now government policy. It will be supported by regulation designed solely to meet the needs of capital. Government debt, and so government spending, is seen as the enemy of growth when the exact opposite is the case. And we are to have an economy that remains, in her words, proudly:
open for business; open for trade; open for investment.
Yesterday, I described this as an economy that always sells us out to the highest bidder, because that is exactly what it is. And meanwhile, Reeves is apparently completely closed to the idea that economic policy might serve anything other than the interests of finance.
In all this, it is important to remember that Reeves is, supposedly, a Labour Chancellor. We can only conclude that one of the things put up for sale, long ago, were her principles, because she has clearly sold out. We will all may the price for that.
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We are truly on the road to serfdom.
I despair
Nothing about the real economy of meeting peoples needs
Somebody needs to show her an example of her economic model being run in Ravel and explain it to her in very simple language.
With those words, she has condemned herself to be seen as a willing idiot by those of us in the know (which are probably too few in number).
She seems to think that there will be any semblance of self control in the City – greed still rules the roost.
The worst of it is is that 2007/8 is seen as acceptable and yet it is that which we cannot afford. It might have been OK if the world had not had to suffer austerity and ordinary people got a bail out too. But there was a bailout of private wealth and then austerity in the public sector. My concern is that that has become normalised and her statement seems to suggest it has and that is really bad news.
For the rest of us ordinary folk it will be like being on a slave galley rowing away to nothing.
Well Tories will never ever admit that Market Capitalism will always tend to generate a Class War and therefore regulating is always necessary. The current global trade war is a classic example:-
https://www.almendron.com/tribuna/the-global-trading-system-was-already-broken/
Why should Tories admit this British people regularly vote Tory parties into office, Conservative, Liberal, Labour, now the prospect of Reform. Masochistic ignorance alive and kicking!
Richard, Once again I believe you are spot on with your assessment of the Labour governments latest mumblings, this time Reeves Mansion House speech. It really is alarming just how much she has sold out to the private sector lobbyists and embraced neoliberalist austerity tactics.
I am, however, slightly perturbed about your suggestion of using ChatGPT to write letters to your local MP. Whilst it is good to encourage people to participate in the democratic process by sending such communications do we really want to encourage use of a technology that is both damaging to the environment and still very much prone to hallucinating? Won’t this just cause our political representatives (or their support staff) to be engulfed by a tide of very similar emails and maybe even cause them to use ChatGPT in reply? When we have one AI agent talking to another AI agent I’m not quite sure where that leaves our democracy?
I respect your wright to disagree on ChatGPT.
I have to work with the world we have.
All very depressing stuff. Growth by depression is this governments ethos. I am off to watch Timothy Snyder’s lecture “Road to Unfreedom” which he gave in honour to Isaiah Berlin.
I said in a comment yesterday that anyone claiming there’s such a thing as “Blue Labour” is not talking about the Labour Party (which by definition is associated with red, even if for large parts of its history it was a very light shade). Members of this sect are Tories masquerading as Labour for the sake of their own personal advancement and to keep control of the country for those who really control it (the rich). Reeves’ speech proves this beyond a doubt. This is George Osborne Mark 2. Period.
How any Labour MPs who actually thought they were members of THE Labour Party can continue with this sham I honestly do not know. You cannot have a shred of moral or ethical fibre, or self respect, to continue being part of this charade. And that’s not me being hyperbolic – that’s me speaking truthfully, as a one time member of the Labour Party, a long time (all but twice when I voted Lib Dem and Green) Labour voter, and someone whose been a social democrat all my life.
In short, what’s become of the “Labour Party” under Starmer and Co is shocks me to the core. And speaking not just as I outline above, but also as a (ex academic) political scientist I take some shocking. It truly is, Labour – RIP.
The FTSE is at an all time high, there is a dangerous President in the White House whose tariff policies may well inaugurate a recession and NOW Rachel Reeves seeks to loosen regulation on the banks and encourage ordinary savers into the stock market? Imagine a scenario in which savers follow her lead, and there is a stock market crash in the autumn. This government’s unpopularity after WFA and the benefits fiasco will be as nothing compared to the rage it will be greeted with in that scenario. Does she have no political instincts at all?
No, none at all.
“She added that “putting pounds in the pockets of working people” depends on letting financial firms thrive.”
And yet the very purpose of financial services companies is to take pounds out of the pockets of working people via arrangement fees, penalty charges and usurious interest rates.
The more such companies thrive, the worse life will be for working people.
I suppose Rachel Reeves is proving the truth in the old adage often attributed to Mark Twain that ‘it is one thing to be thought of as an idiot and another to open your mouth and put the matter beyond debate’. If it was not so serious it would be a laughing matter.
🙂
Why, I wonder, is the Oxford University PPE degree held in such esteem? Just to mention a few recent politicians whose “qualification” to run the economy is PPE: Cameron, Truss, Sunak, Hunt, Reeves,… hardly impressive!
Is it time for an assessment of the PPE curriculum? The student initiative Rethinking Economics has audited a number of university degrees in economics. Most are far too limited. I haven’t seen an audit of PPE. Should PPE graduates be banned from ministerial office?
I don’t think they shouild be banned from office
But this degree appears to impart an extraordinary arrogance we should be deeply suspicious of
We should not be surprised. It was reported early on that Reeves was taking advice from George Osborne. So much so that Osborne is supposed to call her, his ‘Mini-Me”.
And remember, Osborne is very good mates with Ed Balls and Yvette Cooper, who went to his wedding.
I look back over my life from the 1950s onwards, and, for the UK, it seems to have been decline, followed by more decline. In spite of technology improving some aspects, the outward face of society has become harsher and less empathetic in so many ways. Politicians, as a breed, only obey the whims and wishes of ‘big money’ in whatever form it takes. (There are just a few that seem to have decided that saying nothing is better than being turfed out from any position of influence.)
Is this the democracy of my youth? – most definitely not.
Is this the ‘freedom’ touted and spouted about? – again, most definitely not.
Can we return to those days of memory? – probably not.
I would wish my children and grandchildren to have something better. But I see no way forward that stands much/any chance of success. Would some catastrophe kick the bulk of the electorate into a state where they realise change is urgently needed?
I hope so…
Binning regulation is one of the precursors to the next financial crisis. While we can hope that when it comes, it will sink the Starmer government, sadly it will also sink those tempted into borrowing more on mortgage, those tempted or pushed out of cash deposits into playing the markets, and many more as well.
Agreed
Reeves gets dismissed as ‘Rachel from accounts’ which misses the real point, as well as being a touch misogynistic. She is totally a creature of her narrow economics, banking, and Treasury background, apparently understanding nothing of the wider economy, regional issues or business especially SMEs. Let alone any concern for the deeper social impacts. Demonstrating the very narrowest of mainstream economics thinking, which is what has got the economy to where it is.
She is behaving as a glove puppet of the City with whom we know she has been having extended discussions. Hence pandering to their wishes and encouraging precisely the kind of behaviours that have been so disastrous for the economy. The kind of speculative activity that extracts wealth for the City whilst doing nothing for the wider economy. Unless you still have a touching faith in trickle down as Reeves appears to do.
What we need are moves to increase productive investment, public and private with lending to SMEs, and throttle back the City’s obsessions with speculative trading and property which primarily benefit themselves. The City is failing to provide the kinds of financial services that the wider economy needs. And I think it was Keynes who warned of the dangers of allowing your economy to be dependent on the activities of a casino.
I have also long thought that regulation is closely linked to ethics. I have worked with organisations large and small for whom regulation is a non-issue as fundamentally they want to do the right thing. There are well and badly behaved organisations on both public and private sectors. Then there are sectors that are forever complaining about regulation but whose repeatedly behave in unethical ways. Regulations are there to be gamed with expensive lawyers and fines just the cost of doing business. The City, fossil fuels, water and construction would be examples of sectors with notorious histories. Similarly the history of Boeing as a company with a fine record then brought down by deeply unethical management where gaming and co-opting the regulator was deliberate and led to fatal disasters.
Thanks Robin, alhough I would disagree on ‘Rachel from accounts’ being misogynistic. Aft6er all, it started as ‘Colin from accounts’. The rest has much to agree with.
Maybe I thought it was unfair to accountants, when it’s economists we should be being unfair to!
🙂
Indeed – it’s all about xxx from accounts and not the gender of xxx
The absolute proof that the UK is run by donkeys.
Help please?
I don’t see how me buying shares “helps grow the economy”.
I have to pay the selling price, brokers fees, stamp duty.
Unless it’s an IPO the money goes to the seller not the company.
There is no guarantee that the company I buy the shares in will pay a dividend or even survive. If I need to sell I run the risk of not getting what I paid for the shares.
If Rachel from complaints wants my money to grow the economy, why am I not allowed to buy, say, £100k of UK Government Bonds at 4%?
Far safer for me so far as I can work out.
Spot on, John.
When you take away property and speculation, the amount of genuine fresh investment done by the City is a very small part of their activity. Ive long thought that ‘investment banking’ should be had up under the trade descriptions act!
Talk to small businesses who get minimal support from banks. Meanwhile at the top end, FTSE companies, it’s all about City pressure to maximise profits and that means minimising investment. Whilst private equity just wants to squeeze the life out of the businesses they buy, and venture capitalists, who do a lot of the investment in start-ups, want to flog them off as soon as they can make a quick buck. All too often to much bigger companies, foreign owned, so the profits and expertise drifts away from the UK.
Much to agree with
Open Democracy coming to the same conclusion
https://www.opendemocracy.net/en/dark-money-investigations/rachel-reeves-keir-starmer-labour-finance-private-equity-takeover/