But if, as expected, interest rates remain well above the minimal levels of the recent past, mortgage lending will be constrained.
Unless much of the heavy lifting comes from the public sector, achieving Labour’s housebuilding target will be difficult. Any additional availability of homes would be welcomed by the young, especially if migration is kept low, but the boost to the economy would not be large.
Devolution to local mayors will have even less impact and is a triumph of hope over experience. Those behind the current craze of devolving powers to mayors fail to recognise that regional devolution has done little to accelerate growth in Scotland, Wales or Northern Ireland.
More useful would be a reform of commercial regulations. The constraints on building nuclear power stations are, for instance, draconian, leading to construction costs in the UK four times those in South Korea and well above Finland or France. There is no need to spend years re-examining designs already approved by the Americans or French, nor do we need a 10-year lead-up before construction starts. We have made nuclear construction far too expensive and slowed both economic growth and the achievement of net zero carbon emissions.
Labour’s deregulation is mainly about housebuilding. Beyond this, the party promises a business-friendly industrial strategy. Not a bad thing in itself, but all governments have an industrial strategy, whether or not they use this name. As the Americans and the EU head down this route, there is little option but to follow.
Industrial strategy focuses on subsidies
Labour’s industrial strategy consists mostly of subsidies for ports, battery giga-factories, green energy and steel. But the scale of subsidies is not large and much smaller than the extra tax relief for businesses in the spring 2023 Budget. Again the impact on GDP will be small.
Labour needs us to believe that future economic growth would have been slow without their own plans. Writing in the Times, Lord Mandelson recently rolled the pitch for this story. He did not use Labour’s silly “14 years of Tory chaos” rhetoric but conceded that the global banking crisis, Covid and the Ukraine war have left a difficult inheritance for Labour. Being who he is, he could not resist adding, without evidence, that Brexit and Truss exert permanent handicaps. The Brexit claim is untrue and the long-term Truss impact was political rather than economic.
Now the banking crisis and Covid are in the past. Without global shocks of similar size, the future looks much brighter and it is important we should expect this and not be persuaded that limited new Labour policies are responsible for an improved economic performance.
Graham Gudgin is honorary research associate at the Centre for Business Research, Judge Business School, University of Cambridge