Reeves embraces “Bidenomics” as a blueprint for a Labor government

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Shadow Chancellor Rachel Reeves is set to embrace “Bidenomics” as a model for a Labor government on Wednesday, saying Britain risks being “sidelined” unless it accepts that the rules of the global economy have changed.

In a speech in Washington, Reeves will advocate for an “emerging global consensus” on the economy, one that involves an active state, a strong industrial policy, “friendshoring” supply chains away from China, and high labor standards.

But Reeves told the Financial Times his new “securonomics” policy was to be based on “the rock of fiscal responsibility” and that Labour’s flagship industrial policy – a proposed £28bn-a-year green investment scheme – should come under its fiscal rules.

The “Green Prosperity Plan” is Labour’s version of President Joe Biden’s $369 billion Inflation Reduction Act – a large program of subsidies and tax breaks – and Reeves said it will be at the heart of his “modern industrial strategy”.

But Reeves has also promised to cut government debt as a share of gross domestic product over five years, meaning she could be forced to scale back the £140bn five-year green program if public finances are tight. She said rules were key, adding, “Fiscal discipline is really important.”

Reeves said it was vital to control day-to-day government spending to create space for “strategic investment” in new industries and green energy technology and that he would exercise strict control. “Coworkers will tell you Rachel knows how to say ‘No,'” she added.

Reeves’ choice of Washington’s Peterson Institute to launch his economic project — A new business model for Britain — it is a deliberate attempt to align a supposed Labor government with the Biden administration.

He says Britain has become less relevant in Washington and that conservative criticisms of Biden’s economic model – Energy Secretary Grant Shapps warned in January that US green subsidies could lead to a “dangerous” slide into protectionism – has exacerbated this trend.

“What’s dangerous is staying out and finding that this investment is all going overseas,” he said, arguing that the state now must work alongside businesses to develop technologies, build strong supply chains and train workers for a new economy.

In contrast, British Prime Minister Rishi Sunak has refused to pursue a full-blown industrial policy, preferring instead to prioritize sectors including the life sciences and creative industries.

Reeves said she was “inspired” by speeches by Janet YellenUnited States Secretary of the Treasury, e Jake Sullivan, Biden’s national security adviser. He also highlighted state activism in countries like Germany and Australia.

The three-day visit to the United States is a pivotal moment for Reeves: an attempt to present herself internationally and domestically as chancellor-in-waiting. At meetings in New York and Washington you have repeatedly said that Britain under Labor would be ‘open for business’.

Taxes are at a 70-year high. I’m not going to be a big tax-collecting chancellor

Reeves’ itinerary took her to the trading floor of the New York Stock Exchange – the symbolic heart of global capitalism – where she posed for photos under the exchange bell, grinning at jokes about what Jeremy Corbyn, the former far-left leader of Labour.

But 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 keep happening,” she said.

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

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

Reeves also sees the planned 2025 review of Britain’s “chaotic” Brexit trade deal with the EU as a time to address friction in areas such as food and the recognition of professional qualifications. However, he ruled out a return to the bloc’s single market or customs union.

Although a Labor government would inherit limited public finances, Reeves joked that he had no intention of imposing “a special tax on FT readers” or targeting the wealthy beyond previously announced plans. The party would be over tax breaks enjoyed by private equity executives and private schools and abolish the tax breaks guaranteed by private individuals claim non-domiciled status.

“Taxes are at a 70-year high,” he said. “I’m not going to become a big tax-collecting chancellor.” Reeves said the alternative was to stimulate economic growth and he had “no plans” to match capital gains tax rates with income taxes, or to cut tax breaks on pension contributions for top earners.

Corporate tax reforms would focus on corporate rates – a big deal on Britain’s high streets – and incentives to encourage companies to invest, rather than change corporate tax rates, Reeves said. Tax cuts for “working people” were a priority, she added.

State-educated Reeves, 44, hopes to become Britain’s first female chancellor, and her traveling team is all female. A former Bank of England economist, she was seconded to the UK embassy in Washington in the 2000s, where she met Nick Joicey, her future husband and senior government official.

Reeves has been targeted by left-wing Labor activists for being an alleged ‘hidden Tory’ but said the hatred abated as Corbyn supporters left the party. Approaching power also helps, she added. “The work is in an unrecognizable position from where we were three years ago.”

Reeves was pilloried on social media this week for deleting a tweet in which she was pictured on her flight to the US holding a BA business class ticket, attracting claims calling her a “champagne socialist.” You defended the arrangements for your first long-haul journey as shadow chancellor.

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

“I have a really busy schedule when I’m here,” she said. “I think to operate at the level I want to operate at, I think it is appropriate to ask a donor to fund this trip.”

While in Washington, Reeves was expected to meet members of Biden’s economics team at the White House and hold talks at the US Treasury and the IMF.

Reeves, a child chess prodigy, said Labor was in a strong position to win the next election, but her hopes of becoming chancellor rest on how the party fares next year.

“It’s like we’re a rook up on move 30,” he added. “But we play against an opponent who usually beats us.”