The elephant in the room that looms over Labour’s plans for growth

In a fractious, polarised and acrimonious debate about the future of the country, there is at least one thing on which politicians in Britain, from hard left to far right, can agree: the main problem is sluggish economic growth.

It also happens to be what has led to so much discontent and political instability in recent years, most notably in the Brexit referendum of 2016: the one that – unhappily timed during a period of austerity – offered the false promise that leaving the EU would solve matters.

Disaffected voters have not hesitated to punish all three main parties, and – from Gordon Brown to Rishi Sunak – have pushed, successively, six underperforming prime ministers from office (with Boris Johnson’s relaxed attitude to propriety a particularly aggravating factor in his ejection).

Had the long-term trend of rising productivity, steady non-inflationary growth and rising living standards that prevailed from the 1990s until the global financial crisis of 2008 continued uninterrupted until now, then the average British household might be about £20,000 a year better off – in terms of personal consumption and the quality of public services. Hence the discontent. Any government that fixes that should be rewarded with a long period of uninterrupted rule.

As the prime minister and the chancellor so frequently remind us, their “growth mission” is the most vital of all the tasks they have set themselves. Rachel Reeves has now pledged to cap corporation tax at 25 per cent in a bid to give a much-needed boost to British business. She and Sir Keir Starmer will slash red tape and set out a roadmap on business taxation to provide “certainty” for investors.

Then again, growth was the focus for Mr Sunak and for many other of his predecessors – but the challenges defeated them. Why will it be so different for this Labour government?

For Sir Keir, it is certainly a foundational mission, and a phenomenally stretching one. He and Ms Reeves have made their lives even more difficult by promising “to secure the highest sustained growth in the G7 – with good jobs and productivity growth in every part of the country making everyone, not just a few, better off”. It’s worth mentioning that bringing that happy prospect to bear is not entirely within the control of any British government.

Without pushing growth higher, or at least making such an idea look realistic, the prime minister may find that his ambition to preside over a “decade of renewal” is rudely interrupted by another wave of disappointed voters at the next general election. Hence the great blitz of publicity surrounding the International Growth Summit and the launch of a “modern industrial strategy”.

Such vaunted events have, sadly, been fairly routine in recent times, and have routinely led nowhere, however well intentioned and thoughtfully constructed. Indeed, Britain’s history of the state guiding the economy, since dirigiste planning and corporatism became fashionable in the early 1960s, has rarely yielded lasting success.

That said, for post-Brexit Britain, there isn’t much alternative to such initiatives. Brexit – along with the damage it has inflicted on the welfare of the British people – is the persistent and constant “elephant in the room”. It will even be present in the palace ballroom where the King will be enjoying drinks and convivial chatter with some of the biggest investors in the world about the (extremely welcome) investment schemes they’ve been announcing.

Equally uncomfortably, politics and some unambiguous words in Labour’s election manifesto mean that all but the most minor adaptations to the Brexit deal are ruled out for this parliament at least – no return to the single market and the customs union, which would trigger a spurt of trade and investment; nor to the free movement of labour that would immediately boost the UK’s agricultural, hospitality and care sectors.

So, striking ad-hoc deals with the likes of Eli Lilly, Dubai Ports (DP World/P&O Ferries) and BlackRock is about as good as it gets – and is not to be sneered at. The agreement between Eli Lilly and the NHS, for example, promises not only to create jobs and strengthen Britain’s proven competitive advantage in the life sciences sector, but also to tackle the obesity crisis and save the health service billions of pounds in long-term treatments.

There is a public subsidy involved, but one that should pay back; such “strategic” partnerships between private and public sectors can be a “win-win”. Even the DP World row, now resolved, shows that large transnational forms can be persuaded to invest – and make money – in countries where “hire and fire” is no longer tolerated.

There should be limits, though. The history of civil servants, with or without the involvement of businesspeople, “picking winners” is at best a mixed one. The involvement of private investors in the British water and rail industries has also proved problematic, to say the least.

It may have been comparatively easy, and superficially impressive, to see large foreign companies and institutional investors (such as pension fund managers) acquire large equity stakes in these quasi-monopolies. The captive market of UK consumers provided the usually foreign shareholders with handsome, reliable dividends. Yet the inward “investment” proved to be mostly of the “portfolio” variety.

There was little investment in the actual physical assets of these businesses, while vital utility services were run down – and many are now at or close to the point of financial collapse. Thames Water, it is widely predicted, will cost the Treasury about £10bn to rescue.

These particular public-private “collaborations” have proved, or will soon prove, to be a disaster for British consumers, taxpayers and the environment alike.

The government should also be wary of too rapid a process of reform around the rules on planning, and on the conduct of private businesses. Past frenzies of deregulation led to such costly horrors as mad cow disease, the banking crisis, and the Grenfell Tower disaster, to name a few.

The chancellor, the business secretary Jonathan Reynolds, and the health secretary Wes Streeting – in particular – should revisit the “Chesterton’s Fence” principle before they get the shredder out.

Thankfully, there does not seem to be much of a mood to weaken social, labour and environmental protections, but these are in any case rightly guaranteed by the “level playing field” clauses of the EU-UK trade and cooperation treaty (ie the Brexit treaty). That elephant does keep getting into the room...