Rachel Reeves announces growth measures

• Former Bank of England economist Rachel Reeves was named the UK’s first female chancellor of the exchequer — the equivalent of a finance minister — on Friday.
• Reeves said she had instructed Treasury officials to provide an assessment of the state of British spending inherited from the previous Conservative government, which she plans to present to Parliament before the summer recess.

UK Chancellor of the Exchequer Rachel Reeves delivers a speech at the Treasury to an audience of leading business figures and senior stakeholders, announcing the first steps the new Labour government will take to promote economic growth, in London, July 8, 2024.

Jonathan Brady | AFP | Getty Images

LONDON — Britain’s new finance chief on Monday outlined a series of measures to revive the U.K.’s sluggish economic growth and address a nationwide housing shortage.

“I have warned repeatedly that whoever wins the general election will inherit the worst set of circumstances since the Second World War. What I have seen over the past 72 hours has only confirmed that,” newly appointed Chancellor of the Exchequer Rachel Reeves said in her first major speech in office on Monday, adding that “nowhere is decisive reform needed more urgently than in the case of our planning system.”

A former Bank of England economist, Reeves was named Britain’s first female chancellor of the exchequer — equivalent to a finance minister — on Friday as newly sworn-in Prime Minister Keir Starmer named his first cabinet. Ahead of her first speech, she defended economic growth as a party priority and “national mission”. She is not expected to deliver her first state budget until the fall and said on Monday she would reveal the explicit timetable “in due course”.

Reeves added that she had instructed Treasury officials to provide an assessment of the state of British spending inherited from the previous Conservative government, which she plans to present to Parliament before the summer recess.

Housing and planning took center stage in Reeves’ speech on Monday:

“First, we will reform the national planning policy framework, consulting on a new growth-focused approach to the planning system before the end of the month. Including restoring mandatory housing targets. And from today we are ending the absurd ban on new onshore wind farms. [farms] in England,” she said.

“We will get Britain building again. We will get Britain’s economy growing again. And there is no time to waste,” Reeves added.

Housebuilding has emerged as a key priority for the Labour government as it seeks to cut red tape that has chronically limited housing supply and inflated the country’s housing market. A total of 212,570 new homes were completed last year under the Conservative administration, according to government figureswhile the Resolution Foundation think tank in late March found that UK households receive “an inferior product in terms of quantity and quality”, even though, “compared to our overall price levels, the UK has the highest quality-adjusted housing prices of any developed economy”.

Shares in homebuilders rallied on Friday amid expectations that last week’s Labor victory will reignite momentum in planning. The faction previously promised build 1.5 million new homes (300,000 per year) and reaffirmed the objective in its latest campaign manifestostating that it will not be “afraid to make full use of its intervention powers to build the homes we need” when necessary.

The target is seen as a tall order by some, with previous governments largely failing to deliver on similar promises. Hugo Bessis, senior economist for cities and regions at Capital Economics, said in a recent note that housing reform “is indeed complex because, although it is considered a national challenge, the issue is very local.”

“For politicians, this means that change often meets with a lot of resistance,” he said.

Reeve’s comments come as Britain recovers from a shallow recession in the second half of last year and a period of economic uncertainty following Britain’s departure from the European Union, the Covid-19 pandemic and international inflationary pressures in the wake of Russia’s invasion of Ukraine and renewed war in the Middle East. London has also struggled to regain its lustre as a global financial hub amid a dearth of new IPO listings.

“In an uncertain world, Britain is a place to do business,” the new finance chief promised on Monday. “I know many businesses have looked to Britain in recent years and wondered whether we are a safe haven for investment. I want that to change and, with me as chancellor, I believe it will.”

Labour faces a weak economic outlook in the short term — UK Office for Budget Responsibility wait only 0.8% GDP growth this year, followed by 1.9% expansion in 2025. The International Monetary Fund projects growth this year was weaker, at 0.5%. Weighing on the outlook, net public sector debt, excluding public sector banks, stood at 99.8% of GDP preliminarily at the end of May, according to official data.

“Our number one mission is to have the highest sustained growth in the G7, with good jobs and productivity in every part of the country,” Reeves said in his speech.

In his 135-page manifestoThe ruling party has promised to deliver “wealth creation” as well as raise £7.35 billion ($9.42 billion) by 2028-29 to fund public services by closing more tax loopholes. It has also proposed creating a £7.3 billion national wealth fund to channel funding into steel, automotive, carbon capture technology and gigafactories.

As part of broader monetary policies, she confirmed that the new Labour government has no current intentions to change the way Bank of England reserves are treated or the interest they accrue.

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