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Labour’s remarkable landslide provides a once-in-a-lifetime opportunity to reboot and transform the UK economy.
The incoming Chancellor and Prime Minister know this and I am told they intend to achieve this in office. Rachel Reeves told me she was looking for a “growth mandate.”
They believe they won this election with a message of political and economic stability after years of chaos.
Liz Truss’s mini-budget loomed large in the minds of key swing voters who got on the property ladder in an era of near-zero interest rates and voted Conservative under former prime minister David Cameron.
These newly built housing estates in each constituency – “Barratt Home Britain” – turned red. This underpins the incoming Chancellor’s “ironclad” commitment to keep borrowing and interest rates under control. “Stability first” is the mantra.
But they have also been told privately by former Downing Streeters and some captains of industry that “stability, while welcome, is not enough”.
While Labour’s manifesto set out a mission and a very broad strategy for a stronger economy, it was not a detailed transformation plan. Public net investment, for example, is still set to decline from current levels.
A big criticism of Ms Reeves’ vision of what she calls “securinomics” – a new model of the economy where the government does more to prepare the private sector for massive investment in green industries – has been a lack of money.
It’s an attempt to emulate what US President Joe Biden is doing, investing billions in new subsidies through loans and tax breaks aimed at green energy and vehicles. Labour’s plan is essentially “Bidenomics without money”, say critics.
But Labor has been assured that there is a tidal wave of private investment – hundreds of billions by the end of the parliament – waiting to happen if there is political, economic and policy certainty. But they must act fast to secure it.
Some key investors say they cannot wait another year for sensible revisions to planning or energy policy, for example. Tens of billions in investment in renewables, for example, are being held up by planning disputes and ten-year waits to connect to the National Grid. This, Ms Reeves told me, led to “an effective moratorium on building the cheapest forms of energy”.
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But there is some intrigue over whether, in government, Sir Keir Starmer and Ms Reeves will now bravely face opposition on housebuilding or key net zero transition measures. If it’s going to work in a rapidly transforming economy, it’s bound to hurt some people.
There are a number of immediate challenges in public finance. Other bankruptcies of councils and universities need to be addressed. Shadow ministers say they are overwhelmed by the number of working families upset about special education provision which has suffered council cuts.
While Labor has ruled out an increase in headline tax rates, there are other taxes that could rise in the Autumn Budget. Work on it and control of expenses will begin very quickly.
Better for many consumers and the public finances, the Bank of England could finally start cutting rates on August 1.
An imaginative approach to strict public finance rules that allowed for more initial worthwhile investment could prove irresistible.
The challenge now is to make the tough ‘big bang’ style decisions that can turn around Britain’s anemic economic growth.
Labor did not want to engage in these arguments before the election. But because of its vast majority, it will have more power than any government in modern times to push through economic reform. Labor’s support base is also not in the areas most likely to vote against much-needed new infrastructure and housing.
The cautious approach, which has seen Labor anxiously protecting its poll lead by not offering much, cannot last in government.
As Mrs Reeves herself said to me this morning: “We must break free from the blight of low growth, high taxes and poor public services.”
To attract the transformational investment needed to make the UK the fastest growing economy in the G7, Labor needs to be bold and decisive.