Reeves sees ‘Bidenomics’ as a blueprint for a Labor government

Shadow Chancellor Rachel Reeves on Wednesday held up “bidenomics” as a model for a Labor government, saying Britain could “be pushed out” unless it accepts that the rules of the global economy have changed.

In his speech in Washington, Reeves will support an “emerging global consensus” on the economy that includes an active state, a muscular industrial policy, “friendshoring” of supply chains from China and high labor standards.

But Reeves told the Financial Times that his new “policy of the economy” must be based on a “rock of fiscal responsibility” and fit within Labour’s flagship industrial policy – a £28bn-a-year green investment programme. fiscal rules.

The “green welfare plan” is the labor version of President Joe Biden’s $369 billion anti-inflation law — a massive program of subsidies and tax breaks — and will be at the center of his “modern industrial strategy,” according to Reeves.

But Reeves has also promised to reduce the national debt as a proportion of gross domestic product over five years, meaning he could be forced to cut the £140 billion five-year green program if public finances are tight. He said the rules were the most important thing, adding: “Fiscal discipline is very important.”

Reeves said it was vital to control day-to-day government spending to make room for “strategic investment” in new industries and green energy technology, and he would exercise strict control. “Colleagues will say that Rachel knows how to say no,” he added.

Reeves chose the Peterson Institute in Washington to launch his new economic plan – A new business model for Britain – a deliberate attempt to align a putative Labor government with the Biden administration.

He says Britain has become less relevant in Washington in recent years, and that conservative criticism of Biden’s economic model — with Energy Secretary Grant Shapps warning in January that US green subsidies could descend into “dangerous” protectionism — has exacerbated that trend.

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“The dangerous thing is to miss this situation and find that this investment is going overseas,” he said, arguing that the state now needs to work with business to develop technologies, build robust supply chains and on the training of employees for the new economy.

In contrast, UK Prime Minister Rishi Sunak has rejected pursuing a blanket industrial policy, favoring key sectors including the life sciences and creative industries.

Reeves said he was “inspired” by his recent speeches Janet YellenUS Treasury Secretary and Jake Sullivan, Biden’s national security adviser. He also highlighted state activism in countries such as Germany and Australia.

The three-day visit to the US is a defining moment for Reeves: an attempt to present himself abroad and at home as chancellor-in-waiting. At meetings in New York and Washington, he repeatedly claimed that under Labor Britain would be “open for business”.

Reeves’ itinerary took him to the trading floor of the New York Stock Exchange – the symbolic heart of global capitalism – where he posed for pictures under the stock bell, grinning through jokes about what former hard-left Labor leader Jeremy Corbyn would say.

However, he argued that the rise of China and the vulnerability 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 happen all the time,” he said.

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In New York ahead of his visit to Washington, Reeves told the FT: “The process of globalization and trade is changing.” The new economic model was “much more based on alliance and building in economic security and resilience.”

Over coffee at Manhattan’s Hudson Yards, he said specific British issues needed to be addressed, confirming Labor would review planning rules to allow more homes and green projects such as onshore wind.

Reeves also sees the planned 2025 review of Britain’s “chaotic” Brexit trade deal with the EU as a crucial moment to address frictions in areas such as food supply and the recognition of professional qualifications, but ruled out the UK returning to bloc’s single market or customs system. union.

Although a Labor government would inherit tight public finances, Reeves joked, there are no plans to impose a “separate FT readership tax” or to target the wealthy beyond previously announced plans. The party would end tax breaks for private equity leaders and private schools, and abolish tax breaks for non-residents.

“Taxes are at a 70-year high,” he said. “I don’t plan to be a big tax-raising chancellor.” The alternative, Reeves says, is to boost economic growth, and he has no plans to bring capital gains tax rates into line with income taxes or reduce tax breaks on pension contributions for higher earners.

Reeves said business tax reforms would focus on business tax rates – a big issue on Britain’s high street – and incentives for companies to invest. Tax cuts for “working people” were a priority, he added.

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Reeves, 44, a civil servant, hopes to become Britain’s first female chancellor and has an all-female team on the trip. A former Bank of England economist, she was posted to the UK embassy in Washington in the 2000s, where she met Nick Joicey, her future husband and a senior civil servant.

Reeves has been targeted by left-wing Labor activists for allegedly being a “closet Tory”, but he said the hatred has abated as Corbyn supporters leave the party. Getting closer to power also helps, he added. “Labour is in an unrecognizable situation as it was three years ago.”

Reeves was lambasted on social media this week for deleting a tweet showing him on a flight to the US with a BA business class ticket claiming he was a “bubbly socialist”, but he defended the deal at first. – carriage as shadow chancellor.

The visit, which included dinner with New York media, business and political figures at the Harvard Club, was funded by a “longtime Labor donor.”

“I have a very busy schedule when I’m here,” he said. “I think to operate at the level I want to operate at, and I think it’s appropriate to ask a donor to fund that trip.”

In Washington, Reeves was scheduled to meet with members of Biden’s economic team at the White House and hold talks with the US Treasury Department and the IMF.

Reeves, a chess prodigy, said Labor was in a strong position to win the next election but his hopes of becoming chancellor depended on how the party performed next year.

“It’s like being a dummy in step 30,” he added. “But we’re playing an opponent who usually beats us.”