Rachel Reeves has told MPs the government needs to go “further and faster” to increase economic growth, as Downing Street sought to reassure people concerned about the environment that net zero and increasing output go “hand in hand”.
The chancellor has unnerved some Labour MPs and green campaigners with her increasingly punchy rhetoric about growth being a priority over preventing climate change, as she strives to improve the UK’s anaemic forecasts and drive up living standards.
In a speech on Wednesday, she is expected to outline her plans to radically alter planning rules and accelerate building and infrastructure projects, as well as backing airport expansion, despite fears it may put the UK in breach of its legally binding carbon budget.
Reeves thinks big on planning and growth with housebuilding project
At a meeting of the parliamentary Labour party on Monday, Reeves made a direct pitch to MPs, telling them there would be “no easy routes out” to growing the economy, and the government must “start saying yes” to changes that could create wealth across the country.
“Have we done enough? No. We must go further and faster because the cost of living pressures are still very real for working people across Britain, and the only way we can turn this around is through economic growth,” she told them.
“Will that growth come easy? No. There are no easy routes out. There are always reasons for government to say no. Over the past six months as chancellor, my experience is that government has become used to saying no. That must change. We must start saying yes.
“Now is the chance for us to shout about that potential and the brighter future ahead. Because no one else is going to do it.”
No 10 sought to reassure those who may be concerned about the environmental implications of the relentless drive for growth, insisting it went “hand in hand” with the net zero agenda and the green investment behind it.
“We’ve talked previously about the jobs that green industries of the future will bring, the fact that, by backing Great British Energy and the National Wealth Fund, we’ll be crowding in billions of pounds of private sector investment. These agendas absolutely go hand in hand,” Keir Starmer’s spokesperson said.
Backbench Labour MPs have criticised the emphasis Reeves has placed on the economy, potentially at the expense of the environment.
Barry Gardiner, the shadow climate secretary under Jeremy Corbyn, told the BBC: “Rachel is wrong to pit decarbonising the economy against economic growth. Decarbonisation is the growth of the future. The world is transitioning to net zero and I want our businesses to be leading the way.”
At Monday night’s PLP meeting, Ruth Cadbury, the MP for Brentford and Isleworth, questioned the case for a third runway at Heathrow.
“Our policy is that aviation growth has to be done in the context of our four tests for growth across the UK, our carbon climate commitments, local noise and local air pollution,” she said.
“As chair of the transport committee, I want to have a chance to see it in the context of an aviation strategy, something we’ve been asking for a long time. In the context of a growth strategy, it’s all going in the right direction, but this doesn’t fit. The case for UK-wide growth from Heathrow isn’t there. We’re massively constrained in west London.”
Another backbench MP raised concerns that the apparent support for the airport expansion had come out of nowhere, and that MPs had not been consulted on the issue, even if it remained speculation.
The chancellor’s spokesperson said there was overwhelming support for her infrastructure plans and the government’s agenda to reform the planning system.
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Ed Miliband, the energy and climate change secretary, who ruled out resigning over the decision to back a third runway at Heathrow last week, had told peers that the government saw “no contradiction” between net zero and growth.
“We believe they go absolutely hand in hand, because net zero is a major contributor to growth, can be, and the climate crisis is the biggest long-term economic threat our country faces,” he said.
Questioned by the environmental audit committee on Monday, he refused to be drawn into speculation about Heathrow, but said: “I just want to provide this element of reassurance to you, which is, 100% any aviation expansion must be justified within carbon budgets, and if it can’t be justified, it won’t go ahead.”
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In a further effort to improve growth, Reeves said she would allow businesses to access surplus funds in occupational final salary pension schemes for investment.
About 75% of the funds, also known as defined benefit schemes, are in surplus, worth £160bn, but restrictions have meant businesses have struggled to invest them, she said.
She outlined proposals for pension megafunds to be created from individual defined contribution schemes and a merger of local authority pension schemes in her Mansion House speech.
Many pension fund trustees are known to be concerned that allowing company boardrooms access to surplus funds could leave their schemes vulnerable after a panic in financial markets.
Without strong safeguards, giving businesses access to surplus pension funds could also make them more attractive targets for foreign takeovers. It is understood the new regime would allow trustees to block moves to access surplus funds if they believed it undermined the safety of the fund.
Many pension schemes can already hand over surplus funds, while others cannot until legislation is passed, Treasury officials conceded.
