Governed by partnership.

14 November 2024

Guest Column: Joe Shipley, Kekst CNC

Labour formed its first government in fifteen years two months ago. The Prime Minister Sir Keir Starmer, and his Chancellor of the Exchequer Rachel Reeves, now must tackle the brutal realities of government. What was a fairly comfortable – if long – campaign has turned into an uncomfortable – and long – plan to govern Britain over the next five years.

The period of political instability in the UK that began in 2016, following the Brexit referendum, is over. Sir Keir has a huge majority. There will be no more chopping and changing of Prime Ministers for the next five years. But the economic uncertainty that has plagued Britain since the Global Financial Crisis continues.

The multiple Governments that have led Britain since 2007-8 have all been perplexed by the same productivity puzzle. Economic performance, that had broadly tracked the United States and other high-performance economies in the previous two decades, was unable to find its rhythm. The supply-side shock of Brexit hasn’t helped.

But Ms Reeves thinks she has a solution. Planning reform. This seemingly boring measure, which has rarely been the focus of sustained Government interest, is now central to the agenda of the Labour administration. British cities, and British infrastructure investors, are constrained by the tightening handcuffs of a planning system designed in the 1950s, when ‘urban sprawl’ – the outward expansion of large conurbations - was seen as a terrible fate to be avoided at all costs.

Today, the areas of the UK with high productivity – London, Edinburgh, Bristol and, increasingly, Manchester – are held back by the ‘green belt’ and other measures that restrict house building and industrial development and do little to protect the environment. Local politicians have every incentive to oppose any new investment in their local area – a Labour MP has commented that, on election, the first piece of advice she was given by an older colleague was to oppose any new building in her constituency if she wanted to keep her seat.

Labour strategists are used to worrying that their polices will put them on the ‘wrong side’ of business sentiment. A concern amplified by the positions taken by some parts of the UK media. But when it comes to planning reform, the Government could not have any more support. It is hard to meet a British business leader who does not think the planning system is holding the UK back.

So, when Ms Reeves promised to ‘fix the foundations’ of the UK economy by changing planning policy for good, it was welcomed. But the response to the detail of Labour’s reforms has been less enthusiastic: ‘is that it?’ was the mood. The new housing minister, Matthew Pennycook, explained that because the urgency of the task of building more houses was so great Labour had to opt for “keyhole surgery” not “radical reform”.

When business leaders complain to Labour advisers, asking why change wasn’t more fundamental, their answer is ‘what have you done for us lately?’. They point out that the reforms necessary to allow investors to build more houses, wind farms, solar arrays, and data centres are politically costly. But too often CEOs and other business leaders are far too reticent to make the positive case for policy reform.

What the Labour Government are asking for is a new kind of partnership with business, based in Britain and around the world, to achieve their shared goals. This means corporates and corporate leaders acting as ‘outside advocates’ for policy change, rather than unhappy lobbyists grumbling behind closed doors.

This partnership mentality will require a new mindset on all sides. The productivity puzzle has been accompanied by a rather miserabilist mentality in Britian redolent of the miserable 1970s: ‘nothing ever changes so why bother trying?’. But Sir Keir and Ms Reeves have few other policy levers to pull beyond planning reform to improve Britain’s long term economic torpor. To make this work, partnership needs to last.

Joe Shipley is a Partner at SCC UK Member Kekst CNC