In defence of Rachel Reeves

Rachel Reeves has lost it. Or “Rachel from accounts” never had it in the first place. She’s been too gloomy, and now she is too optimistic. She was too into net zero, now she is not green enough. If she carries on this way she will take the country into recession – oops, it’s already started.

A bit of this the chancellor has brought upon herself – the angst-ridden messaging of her early weeks in office could hardly have been expected to boost business confidence. Most of it, she has not.

Reeves believes she must turn around the British economy for years to come. She seems willing to bet on the long term and take risks in the short term to do that.

So, despite the noise about Heathrow’s third runway, it is the connection of Oxford and Cambridge that was the key announcement on Wednesday as the chancellor underlined plans for growth. Reeves believes the “Ox-Cam Arc” of high-tech industry could add £78 billion to the British economy by 2035.

It is shocking that connecting and exploiting two of the best universities in the world has not been a priority for previous governments. They and the university sector in general are one of the few world-beating advantages that the UK has, so this is a no-brainer.

Yet things have been so bad that Cambridge has been held back by a lack of water – shockingly in the UK we cannot build enough factories or laboratories where they are needed because there is not enough water. That must change. Nearly £8bn for nine new reservoirs will help.

But of course it goes much deeper than that. We also need much more housing in an area which is attracting and will attract investment from around the world. We need better road and rail links. Oh, and we will have to let far more highly qualified immigrants in to work in such areas.

Only big moves like these will change the long-term growth prospects for the UK. Reeves says she wants to go “further and faster”, and has shown she is willing to take unpopular decisions to do it. The third runway at Heathrow, she says, is because the UK only has one hub airport and that does not run flights to many new important economic zones because of a lack of capacity.

Critics of the government and even some friends will continue to point to contradictions in what the chancellor is doing. Business doesn’t like Labour’s employment reforms for employees, and hates its hike in employer National Insurance. Stephen Phipson, the head of the manufacturers group Make UK, said “There is a clear contradiction between implementing laudable measures such as planning reform and infrastructure investment whilst, at the same time, applying a handbrake through measures which will inevitably reduce investment and freeze recruitment.”

The chancellor is only too aware of that issue, and dwindling faith in Labour among the very people she spent so much time wooing before the election She would argue that she has inherited a dog’s dinner and has had to sort out the mess left by the last government, which no one told her existed.

On this, Reeves is right. It is fair to say that if she had not balanced the books and raised taxes, we might be at even more risk of a downturn than we are now. Government spending would have had to be slashed wholesale, something that really hits growth as we have discovered over the last 14 years. This is not something the right wing press mentions as the likes of the Spectator and Telegraph joyously predict a recession.

Even so, we and she will just have to hope that the National Insurance increases for British firms, being a one-off, will be survivable.

Reeves, in any case, has her eyes set on the future. As she said on Wednesday, she has increased government investment to 2.6% of GDP from the 1.9% she inherited. That figure is still way too low but it is at least headed in the right direction. The results will be felt years down the line, but if you never start the results never arrive.

Short-termism has been the curse of the British economy for decades, breaking its spell is proving to be tough but Rachel Reeves has made a start.