Shadow chancellor Rachel Reeves will embrace “Bidenomics” as a model for a Labor government on Wednesday, saying Britain risks being “marginalized” unless it accepts that the rules of the global economy have changed.
In a speech in Washington, Reeves will back an “emerging global consensus” on the economy, including a vibrant country, strong industrial policy, “friendship” supply chains away from China and high labor standards.
But Reeves told the Financial Times that her new “economic security” policy should be built on “the rock of fiscal responsibility” and that Labor’s main industrial policy – a proposed £28bn-a-year green investment program – had to align with its fiscal rules.
The “Green Prosperity Plan” is Labor’s version of President Joe Biden’s $369 billion inflation-reduction bill – a massive program of subsidies and tax breaks – and Reeves said would be at the center of her “modern industrial strategy”.
But Reeves has also promised to reduce public debt as a share of GDP over five years, which means she may have to cut £140bn from the green program over five years if public finances are tight. The rules are of paramount importance, she said, adding, “Financial discipline is really important.”
Reeves said it was necessary to control day-to-day government spending to make room for “strategic investment” in new industries and green energy technology, and she would exercise strict oversight. She added, “Colleagues will tell you that Rachel knows how to say ‘no’.”
Reeves chooses Washington’s Peterson Institute to launch economic blueprint A new business model for Britain – It is a deliberate attempt to align a putative labor government with a Biden administration.
She argues that Britain has become less important in Washington and that conservative criticism of Biden’s economic model – Energy Secretary Grant Shapps warned in January that US green subsidies could lead to a “dangerous” slide into protectionism – has exacerbated this trend.
“What is dangerous is sitting outside and finding all this investment going abroad,” she said, noting that the country must now work alongside business to develop technologies, build strong supply chains, and train workers for the new economy.
By contrast, British Prime Minister Rishi Sunak has refused to pursue a full industrial policy, preferring instead to prioritize sectors including the life sciences and creative industries.
Reeves said she was “inspired” by the letters Janet YellenUS Treasury Secretary, W Jake SullivanBiden’s National Security Adviser. It also highlighted the state’s activism in countries such as Germany and Australia.
The three-day visit to the United States is a defining moment for Reeves: an attempt to present herself internationally and domestically as a chancellor-in-waiting. At meetings in New York and Washington she said repeatedly that Britain under Labor would be “open for business”.
Taxes are at their highest level in 70 years. I have no plans to be a top tax advisor
Reeves’ itinerary took her to the trading floor of the New York Stock Exchange — the symbolic heart of global capitalism — where she posed for pictures under a stock exchange bell, grinning through jokes about what Jeremy Corbyn, the former hard-left leader of the Labor Party, would do. .
But she argued that the rise of China and the exposure of Western countries to shocks such as Covid and the war in Ukraine have changed the rules of the game. These “once-in-a-generation events keep happening,” she said.
Speaking in New York before her visit to Washington, Reeves told the Financial Times, “The way globalization and trade has happened is changing.” The new economic model was “more allied-based and built on economic security and resilience”.
Over coffee at Hudson Yards in Manhattan, she says British problems must be addressed specifically, emphasizing that Labor will reform planning rules to allow more homes to be built and green projects, such as wild winds.
Reeves also sees the scheduled 2025 review of Britain’s “messy” trade deal with the European Union as a moment to address frictions in areas such as food and the recognition of professional qualifications. But she ruled out a return to the bloc’s single market or customs union.
Although the Labor government would inherit narrow public finances, Reeves joked that she had no plans to impose a “special tax on the FT reader” or target the wealthy beyond previously announced plans. The party would end tax breaks enjoyed by private equity and private school managers, and eliminate tax privileges guaranteed to individuals claiming non-resident status.
“Taxes are at the highest level in 70 years,” she said. “I have no plans to become a top tax advisor.” Reeves said the alternative is to boost economic growth and that she has “no plans” to match capital gains tax rates with income tax, or to cut tax breaks on pension contributions for higher earners.
Reeves said business tax reforms would focus on business rates – a big issue on high streets in Britain – and incentives to encourage companies to invest, rather than changing tax rates on major businesses. She added that tax cuts for “working people” were a priority.
The country-educated Reeves, 44, hopes to become Britain’s first female chancellor and her team for the trip are all-female. A former Bank of England economist, she was seconded to the UK Embassy in Washington in the 2000s, where she met Nick Joyce, her future husband and senior civil servant.
Reeves has been targeted by left-wing Labor activists for supposedly being “conservative” but says the hatred has waned as Corbyn supporters have left the party. Being close to power also helps, she added. “The business is unrecognizable to where we were three years ago.”
Reeves was vilified on social media this week for deleting a tweet in which she was photographed on her flight to the US carrying a business class ticket, sparking claims that she was a “champagne socialist.” She defended the arrangements for her first long trip as Shadow Chancellor.
The visit, which included a dinner with New York media, business and political figures at the Harvard Club, was funded by a “longtime business donor”.
“I have a very busy schedule when I’m here,” she said. “Working at the level I want to work at, I think it’s appropriate to ask a donor to fund this journey.”
While in Washington, Reeves was scheduled to meet with members of Biden’s economic team at the White House and hold talks at the US Treasury and International Monetary Fund.
A child chess prodigy, Reeves said Labor was in a strong position to win the next election, but her hopes of becoming chancellor depended on the party’s performance next year.
“It’s like we’re 30-step beginners,” she added. “But we play against an opponent who usually beats us.”