‘You do just wonder what on earth they were doing’

Good afternoon, just back from Liverpool after three days at the Labour party’s annual conference where it was clear ministers were trying to address some of the frustrations about the lack of clarity in the government’s first 100 days.

The biggest material shift was the apparent readiness by the chancellor Rachel Reeves to recalibrate the government’s fiscal rules in order to allow for more capital spending to underpin the government’s growth missions. One to watch.

But inevitably, given we are mid-Whitehall spending review and pre-Budget, the rest of it was pretty small beer, which made it very hard for ministers waiting on the outcome of that process to give the impression that they are moving the ball forward. 

Reeves’s announcements included a £7mn pilot for breakfast clubs in primary schools. That’s great but really just window-dressing when set against the £3.4bn the Institute for Fiscal Studies says it will cost to remove the two-child limit on child benefit — the key driver of the UK’s dire recent record on child poverty.

The industrial strategy is now promised for Spring 2025, with a paper promised at the Budget on October 30 “outlining the long-term sectoral growth and priority industries of the government”, followed by another industry consultation before final publication.

Not enough ducks in a row

From speaking to industry chiefs who attended the business day at the conference, there is still genuine surprise at Labour’s failure to put a few more ducks in a row before coming to office.

There really is no shortage of Whitehall reports and think-tank templates for industrial strategy, including the recent Harrington Review. What is required is political decision-making to turn those into reality.

The failure to line up an investment minister and a chair of the Industrial Strategy Council, or to be able to say with clarity how that council will function within Whitehall, and whether it will have real clout, remains a source of frustration.

“You do just wonder what on earth they were doing [in opposition],” said one executive who had attended the business forum and, like several participants in the business day, left disappointed at the lack of actual interaction with senior ministers.

This impatience may seem unfair — but industry wants concrete answers to questions about how the government is going to deliver. Plans, for example, to make UK energy costs more competitive or improve the skills pipeline that businesses say they aren’t getting.

The decision to ban the award of new North Sea exploration oil licences was described by three separate senior industry figures as “stupid”, “short-sighted” and “plain barmy”, leading to higher costs, more imports and a drain of vital engineering skills.

A lack of rigour

These gripes may all evaporate after the Budget, but the nagging fear on the conference fringe — expressed by one senior old Labour hand from the 1997 Blair era — is that the inertia in No 10 reflects a more profound problem with the hardwiring of the government.

“They have the Five Missions, which I approve of, but have they really done nothing but eat, sleep and drink them to the point when they become core policy? What I fear has got lost is policy depth and rigour. That is the fundamental issue, not spin or presentation,” they added.

We’ll see. Ministers and officials promise good things are coming down the track — reform of apprenticeships, the youth guarantee of training or employment, planning reform (of which more below), and better tools of government, like a new regulatory innovation office that will pick a few key targets to improve delivery in strategically important sectors.

All of this is to be welcomed, but there is just an impatience to get on with it.

A new song for Europe?

One element of economic regeneration that was conspicuous by its absence in Liverpool was the ‘reset’ with the EU, which barely received a mention in any of the major speeches by cabinet ministers — something several EU diplomats mentioned to me.

As the conference concluded, Sir Nick Harvey, the CEO of the European Movement UK, put out a statement reminding everyone that being outside the EU single market was costing the public finances more than £40bn a year. “Harsh reality won’t go away just because they are too timid to mention it,” he added.

Still, there was plenty of activity on the fringes, and yesterday it was announced that European Commission president Ursula von der Leyen and Sir Keir Starmer will meet in Brussels next week to set the ball rolling on some kind of renegotiation. 

There is still much to be worked out, despite all the warm words. As one senior EU diplomat put it: “The melody is there, but now we have to start concentrating on writing the lyrics.” Another put it more bluntly: “It’s time for the UK to tell us what they want”.

It will be interesting to see how far Starmer goes in Brussels. At a very basic level, the EU side wants the UK prime minister to come to EU HQ and stop tiptoeing around the issues. 

The Labour leadership’s diffidence on improving mobility and accepting the alignment and ECJ oversight needed for a veterinary deal is raising questions in some quarters of the EU establishment about the actual depth of British ambitions.

The gaps over the issue of the youth mobility scheme are the obvious expression of this, and it is clear that Starmer has to get his ministers to a common position on that issue, which the EU has signalled must be part of any wider reset.

Home Secretary Yvette Cooper is clear that a YMS presents a conceptual problem for her, running against the manifesto commitment to “make sure training in England accounts for the overall needs of the labour market” — with any importation of skills set within that framework.

That’s clearly at odds with the much more open and laissez-fair ideas implied by the EU Commission’s first attempt for a youth mobility mandate — not free movement, as the experts keep saying, but still pretty free. 

How far Brussels will crimp this ambition will be key; as will the extent to which the innately cautious Starmer is ruled by fears that any form of mobility deal will upset the right-wing press and alienate Reform UK voters of which Labour strategists are now so wary.

There is no doubt, as another Labour minister puts it, that “landing zones can be found” but given the speed at which frustrations have begun to emerge, that will also require both sides to keep a very clear eye on the bigger picture. 

The risk on the UK side is that familiar political forces (“anything that looks like ‘free movement’ is political kryptonite”) shrinks the reset to the point that equally familiar EU political forces (“nothing till we get our fish”) then narrow the whole thing to the point of meaninglessness.

As more far-sighted European diplomats can see, given the wider geopolitical context in Europe — a continent menaced by Russia, low productivity and a rising tide of populism — that would be a tragically missed opportunity.

Britain in numbers

This week’s chart is based on Ministry of Housing data that shows planning permissions falling across the UK.

That prompted a predictable broadside from housing secretary and deputy prime minister Angela Rayner blaming the Conservative legacy: “The Tories put country before party, failing to stand up to the vested interests blocking growth and compounding their housing failure.”

It’s more complicated than that, as I found when I spent two days at Wiltshire council last week discovering how the process actually works and the blocks to development — I learned a lot, which I did my best to condense into a report here.

One key takeaway was that local councils aren’t clear that Labour’s reforms are ambitious enough to tackle the “vested interests” blocking growth, which include developers and large builders “gaming” the land supply system.

Still, notwithstanding the frustrations of industry reported above, planning reform is one area of Starmer’s government where there is a real sense of ambition, coherence and political determination to make a difference.

We must wait to see how far Labour goes on compulsory purchase order power, policy measures to make developers build and finding the investment needed to sort out housing associations, subsidise affordable housing and underwrite growth in the build-to-rent sector.

But there is radical thinking going on behind the scenes, including new ways to assemble land, bring in private finance and use development corporations to hurry projects forward — this new report by Thomas Aubrey at the Bennett Institute for Public Policy speaks to some of that thinking. Worth your time.

The State of Britain is edited by Gordon Smith. Premium subscribers can sign up here to have it delivered straight to their inbox every Thursday afternoon. Or you can take out a Premium subscription here. Read earlier editions of the newsletter here.