What is Rachel Reeves’s plan for economic growth?

The chancellor laid out a series of “supply-side” changes, aimed at improving the UK economy’s potential to grow, including by tackling what she called “chronic underinvestment”.

Economists believe the UK’s low levels of investment compared with other large economies are a key factor behind the stubbornly weak growth since the global financial crisis of 2008.

To encourage businesses to spend money and create jobs in the UK, Reeves is promising to sweep away some of the barriers that slow down major (and minor) infrastructure projects.

That means a new planning and infrastructure bill, coming in the spring, which will make it harder to object to buildings on environmental grounds, for example – and easier to build homes around train stations.

What else is the chancellor doing to encourage business investment?

Reeves explained other aspects of her plan to woo corporate investors, including urging the UK’s 100-plus regulators to pursue growth, alongside their other duties such as consumer protection.

She is also making changes to pensions regulation, in the hope of unlocking part of the surpluses of defined benefit funds, to be invested in pro-growth projects.

The chancellor listed a series of transport projects she believes are critical to growth, including the much-delayed third runway at Heathrow, which has become symbolic of the UK’s inability to get infrastructure built.

What about public investment?

Experts have also said weak government investment has undermined the UK’s potential to grow. In the past, it has often been the first thing to go when chancellors want to balance the books.

In her speech on Wednesday, Reeves highlighted the government’s plans to boost public investment, pointing out that it would rise to an average of 2.6% of GDP over the next five years.

But that falls well short of Labour’s “green prosperity plan”, announced by Reeves in opposition, under which the party promised to pour £28bn a year into environmental projects.

That idea was significantly scaled back to under £15bn a year a few months before the election, after party strategists began to fear it exposed Labour to attacks about profligacy from the Tories.

Will it work?

There is no magic lever the government can pull in Whitehall to unlock growth within weeks or months, but Reeves does appear to be making a concerted assault on barriers to growth in the medium term.

The recent survey of chief executives by the accountancy firm PwC suggested the UK is seen as the second most attractive destination for foreign investment behind the US, perhaps benefiting from political uncertainty in Germany and France. Reeves’s determined effort to shift the mood music may help some of them to commit to projects here.

The Bank of England is likely to cut interest rates next Thursday, and to continue cutting through 2025, giving consumers a fillip, and potentially boosting confidence at a critical time for the government.

Add all this together, and the outlook for the next six months looks considerably less bleak than many commentators feared at the time of the autumn budget.

What about Brexit?

Reeves didn’t mention the B-word, but she did point out that the EU is the UK’s closest and largest trading partner – stressing that achieving a smoother relationship was in the “national interest”.

Given the government’s relaxed response to the suggestion from the EU’s negotiator in Davos last week that the UK could join the Pan-Euro-Mediterranean convention (PEM), which could help to dismantle trade barriers, her remarks suggested Labour is preparing to argue for closer links.

The government’s red lines are highly unlikely to shift, but any arrangement that helped UK exporters to re-establish links with the continent would be helpful for growth.

What are the risks for Reeves’s plan?

There are at least three. The first is entirely out of her hands: the global economic backdrop is highly uncertain, given Donald Trump’s arrival in the White House, and his determination to use international trade as an economic and political weapon.

An international downturn would undermine the UK’s prospects, regardless of government policy. A bout of Trump-fuelled global inflation could drive up the cost of government borrowing, eroding what little remains of Reeves’s narrow headroom and forcing the government to make cuts.

Second, Reeves appears determined to sweep aside the constraints on new infrastructure and housing projects – but the politics of this will not be easy to navigate. The Oxford-Cambridge corridor, which Reeves wants to turn in to the UK’s Silicon Valley, passes through semi-rural areas where development is unlikely to be popular, for example, and the rightwing press will amplify protests.

The Daily Mail has already called Tempsford, where there are plans for a new station and potentially a wave of housebuilding, “Starmer’s Village of the Damned”.

Third, there is a question about whether the building sector in the UK has the capacity to expand sufficiently to build the 1.5m homes the government has promised, alongside those new stations and other big infrastructure projects.

Keir Starmer has made clear he wants to cut migration and there is no prospect of a return to free movement with the EU, so the size of the construction workforce and the skills required could yet put the brakes on Labour’s plans.

After Wednesday’s speech, however, it was harder to claim that the government has no coherent plan for growth – and as Boris Johnson once said, “plan beats no plan”.