January 14, 2025 - 7:00am

UK Chancellor Rachel Reeves returned yesterday from a trip to China aimed at strengthening economic ties between the two nations. She claimed that her efforts would boost economic growth, at a time when the British economy feels increasingly anaemic.

At a press conference with Chinese Vice Premier He Lifeng, Reeves announced: “I believe that increasing trade and investment with an economically important partner like China is crucial for achieving my number one mission in Government — economic growth.”

Reeves might as well have been reading from George Osborne’s speech to the Shanghai Stock Exchange in 2015. In that address, Osborne also argued that closer ties between the UK and China would spur growth. “The mutual benefits of connecting our markets are clear,” he said. “Increased access to international capital for Chinese firms” will help foster “sustainable economic growth”.

That Osborne’s 2015 comments are almost interchangeable with the current Chancellor’s a decade later is symptomatic of an alarming lack of fresh political vision in the current government. Despite winning a once-in-a-generation landslide in July, the Labour-led Treasury seems to be offering little better than reheated Cameroonism.

The Chancellor’s own excessively rigid fiscal rules mean that deep public sector spending cuts are seriously being considered. Is this really what the British public voted for? Is there anyone in the Labour team who thinks this economic approach carries any political benefits? Does such abject economic timidity come anywhere close to addressing the many crises facing British society, from housing to living standards to social care?

Obviously not. And yet there is a ready alternative to this malaise, one available to a Labour government for the first time in two generations. This would be a nationally coordinated programme of economic renewal consisting of intensive state aid projects, the expansion of public ownership, selective tariffs, a comprehensive immigration policy, joined-up agricultural policy, high labour standards, and strategic public procurement.

The mechanism that has provided this alternative is Brexit. When Britain was in the European Union, all of these economic policy levers were either removed from Number 10 entirely or conditional on EU rules. The UK could not pursue economic policies which “distorted” the free movement of goods, services, capital, and people across the EU. The single market reigned supreme, codified in European treaties which sat above any domestic law passed by Parliament. The superstructure of European law has now been removed from British policymakers. Yet they are still acting as if the same old rules apply.

Last year, an important figure in British politics astutely observed that the “old certainties about economic management have been found wanting.” They went on: “The economic mainstream is adapting, but a new political consensus has yet to cohere.” That was the Shadow Chancellor Rachel Reeves in her Mais Lecture. It seems that she didn’t really know what the new political consensus was, and certainly hasn’t so far been able to shape it.

Whatever benefits EU membership provided in terms of easy flow of trade, migration, and investment across European countries, it seriously inhibited the power of nationally elected governments, particularly those of the Left, to pursue policies of national democratic control, investment, and planning over their domestic economies. Brexit was always a policy better suited to a Left-wing government than a Right-wing one. But very few political commentators were willing to explore this point and even fewer politicians seemed to understand it.

In Opposition, Labour failed to take seriously the benefits of Brexit. Shamefully, the British labour movement, for the most part, squandered the years after the referendum trying to overturn a democratic election. Still, Keir Starmer yesterday gave signs that he at least enjoys some of the new-found freedom on AI regulation.

Now in government, Labour has a chance to redeem itself. Labour councils for years have talked about the benefits of the “Preston model”, the idea that councils should use their procurement budgets to support socially useful economic activity.

We need a “Preston model” for the United Kingdom. This would mean Westminster using its fiscal heft to support economic activity across the country that delivers social benefits to wider communities, not just improves the bottom line for City firms. Don’t just leave this to cash-strapped councils and hapless devolution projects. Seize the initiative and drive growth out of Whitehall. It’s not fashionable to say, but it can be done.

Instead, the Government is desperately casting about for quick fixes to Britain’s problems. It’s time to do the hard work of creating and implementing an active domestic industrial strategy. A Labour Treasury should be focused on strengthening the British economy from within, not looking to China for salvation.


Richard Johnson is a Senior Lecturer in Politics at Queen Mary University of London.

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