Reeves's Mais lecture: are we any clearer on how Reevesonomics will work?
This week the Shadow Chancellor’s biggest speech to date was billed as the moment she would set out her “new economic model”. But we’ve heard most of it before and questions remain around how it will work in practice.
Rachel Reeves is the latest in a long line of serving or aspiring chancellors, from Nigel Lawson in 1984 to George Osbourne in 2010, to give the annual Mais lecture in the City of London. Mais will mean little to most. But in Westminster, the event is a rite of passage for those who hope to hold the keys of No.11.
Reeves’ speech was briefed as her “Thatcher moment” where she would set out “a decade of national renewal”. She used it to do what politicians do best, deliver message discipline: repeating what voters should remember as they enter the polling booth.
The hour-long speech set out all the main strands of her economic philosophy - ‘securonomics’. Her critique of globalisation, commitment to fiscal discipline and reassurances to keep to the status quo on tax, expansion of workers rights, public-private partnerships and an obsessive pursuit of growth.
Reeves’ said her model will be guided by three central imperatives:
Stability
Investment through partnership with business
Reform.
There was little new material. And so the same old questions re-emerge. Will it be enough to get the economy growing? How will it work politically in government?
Reeves promises growth based on stability. But the future is not in her gift and governments have to respond to events. While Labour criticises the Conservatives for failing to give investors direction, they themselves abandoned their flagship £28 billion green investment plan after building it up since 2021.
Labour can proudly say they haven’t changed their party leader three times in five years. But how will they fare when the cheers of an election victory are over?
Since 2019, we have seen a historically large Tory majority descend to an ungovernable mess. Could the sizable Labour majority the polls predict, lead to a disorganised mob that squanders power? Alternatively, if Labour’s majority is too small, the left could feel emboldened, increasing divisions over existing splits?
Every chancellor wants stability. But the only certainty is change. The next parliament will look completely different with polls predicting as many as 250 Labour gains (Labour won a total of 202 seats in the 2019 General Election). Swathes of unknown and politically inexperienced candidates (although vetted by Labour HQ) will be sweeping into Westminster keen to make their mark. How will this (currently) well-disciplined party stay together? How will a larger party full of new MPs react to political pressures when there are no quick fixes for the economy or public services? Unions like Unite have already attacked the speech for its lack of vision. Will the party stay loyal to Reeves or Starmer, who famously has no political tribe?
Figure 1: Bradshaw’s election prediction model suggests that Labour could win up to 155 more seats - and ours is one of the most conservative forecasts of all the pollsters
Questions remain around Reeves’ approach to investment. Commentators have noted how similar Reeves’ lecture was to Sunak’s in 2022. If you remove the workers rights agenda, Reevesonomics is not far from Boris, Sunak and Hunt’s plans to invest into R&D, skills, science and address regional inequalities (once called levelling up).
There were some new but relatively minor announcements.
The Office for Budget Responsibility will report on the long-term impact of capital spending decisions.
More significant was Reeves’ fiscal rules which are essentially identical to those of Hunt. This was a surprising decision. Reeves had room to move on this given the commentary in recent months, including from Andy Haldane, former chief economist of the Bank of England, and Paul Johnson the Director of the Institute for Fiscal Studies, about the absurdity of these fiscal rules. As Reeves clings to them for credibility and to neutralise Tory attack lines she is binding herself into a potential future straightjacket.
So what will materially change under Labour? One difference could be the impact of new institutions like the British Infrastructure Council, the Industrial Strategy Council, the National Wealth Fund, a strengthened Enterprise and Growth Unit, and climate change back as a Bank of England priority.
Figure 2: the UK has the lowest investment as a share of its GDP in the G7
Another mystery is the euphemism of ‘reform’. How will the silver bullet of 'planning reform' actually work? As Danny Dyer once said on Brexit “it’s like this mad riddle that nobody knows!”. If reform was so easy, why hasn’t it been done? How long will it take? If rules are “bulldozed'' there's the secondary issue of poor grid connectivity. Politically, how can Labour stop NIMBYs in constituency-based democracy? And how will streamlining planning from the centre clash with Labour’s devolution agenda?
Figure 3: the UK’s planning processes have slowed dramatically over the past 10 years
What was notable from Reeves’ lecture was what was not said. There was a lack of detail on Europe - we know that there is a negotiation built into the withdrawal agreement scheduled for January 2026.
Mais was never a speech to pull a rabbit out of the hat. With a May election ruled out and another fiscal event planned for the Autumn, Reeves was careful not to announce a policy that the Conservatives could steal, undermine or spend on something else.
Reeves said that this lecture was about what type of chancellor she is going to be. With a focus on image, Reeves reminded everyone that she is an economist. The names of economists were littered throughout her lecture. Joan Robinson, Karl Polanyi, Dani Rodrik, Mary Paley Marshall, Ed Gleaser. But Reeves is not just an economist. Her challenge as chancellor will be to turn theory into reality.
After all the build-up, the question everyone is asking remains: is this it? While Reeves’ plan may win an election, it isn’t fit for government. Will changes follow once the party is back in power? If not, will Reeves and Starmer survive the political fallout?