Growth Amnesia
Plus: Net Zero & the BOGOF ban
In today’s newsletter:
What did Rachel Reeves say in her Labour Party conference speech?
The Buy One Get One Free ban
Should we abolish Net Zero?
Politicians sometimes pepper their speeches with references to industries that we associate with economic dynamism, progress and prosperity (e.g. biotech, life sciences, creative industries, or nowadays, AI), in the hope that some of the positive associations we have with those industries will rub off on them. Rather unusually, in her speech at the Labour Party Conference, Chancellor Rachel Reeves did the precise opposite. She opened her speech by talking about how her government was propping up ship building, car manufacturing and steel. I have no problem with any of those industries, but employment in car manufacturing and steel peaked in the 1970s, while ship building was at its highest in the 1920s.
Yet it was, in a sense, a fitting start, because the speech had a distinct “Old Labour” feel to it. It reflected the belief that government investment is what drives growth, and government spending is what spreads the proceeds of that growth. In the US, the social democratic Left is currently renewing itself by adopting an agenda of “Abundance YIMBYism” – an agenda that would be perfectly suited for the British Left, even better, in fact, than for their US counterpart. And yet, despite having briefly flirted with such an agenda before, the Labour leadership already seems to have lost interest in it again.
It was not all “Old Labour”, though. Elsewhere, Reeves announced the idea of a jobs guarantee scheme for young people who are not in employment, education or training, coupled with the threat of benefit cuts for those who refuse to participate. This would revive the “New Deal” or “New Bargain”, a New Labour scheme from the late 1990s.
That programme made some sense at the time. It is, however, poorly suited for today’s situation.
The Blair scheme was a version of “workfare” or “welfare-to-work”, a form of welfare with strings attached. We know from past experience that workfare schemes can be effective in getting people off the welfare rolls, and into gainful employment. But those schemes have typically concentrated on able-bodied people, when what we have seen in Britain since the pandemic is an increase in economic inactivity among recipients of incapacity and/or disability benefits. This is a completely different problem: a traditional workfare programme is not even going to reach these people.
All in all, Reeves offered a mix of New Labour ideas that would no longer work today, and Old Labour ideas that never worked especially well to begin with. This is a real shame. The aforementioned “Abundance” agenda shows that there are plenty of interesting centre-left ideas for a revival of economic dynamism and growth, which would suit British conditions perfectly, and which are desperately looking for an outlet here. Judging from the Labour Party Conference, they are not going to find it anytime soon.
Kristian Niemietz
Editorial Director
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IEA Podcast: Head of Media Reem Ibrahim, Executive Director Tom Clougherty, and Editorial Director Kristian Niemietz discuss Rachel Reeves’s party conference speech, new announcements on climate policy, and the BOGOF ban — IEA YouTube
Opposition energy plan ‘first step back to sanity’
Responding to the Conservative Party’s announcement on energy, Andy Mayer, Energy Analyst at the free market think tank the Institute of Economic Affairs, said:
“It is fantastic news that the official Opposition will seek to replace the 2008 Climate Change Act (CCA) in order to prioritise affordable energy security.
“Everyone, bar the current Government, ideologues, and vested interests can see current policy isn’t working. We have the most expensive industrial energy in the world, and second most expensive domestic bills directly as a result of the Act’s legally binding targets for emissions.
“It has encouraged offshoring and undermined investment in our own resources. But has not delivered innovation. The UK is more a buyer of eco-tech than a maker. It has encouraged green finance, but it is underwritten by taxpayers, and has created a lawfare industry for green ambulance chasers using it to block human progress.
“It has created a duplicate energy system of renewables and inefficient gas generation for windless nights, requiring much more infrastructure than the old system, adding cost, but not saving the planet from global warming. The imported oil and gas we still need burns even more fossil fuels to reach us, while those selling to us use the proceeds to ‘drill baby drill’.
“The last time any nation made a central planning mistake as large as the CCA, it was the Soviet Union and Gosplan. They at least had the excuse of believing real control had never been tried and were not pretending to be a free country keen on making lives better.
“We will need to see more of the Opposition’s plans in detail, and they can expect a furious backlash from rent-seekers, but this is an encouraging first step back to sanity.”
Kemi Badenoch is restoring sanity to the climate debate, Energy Analyst Andy Mayer wrote in CapX
Until today’s decision by Kemi Badenoch to scrap or reform the Climate Change Act, Ed Miliband was arguably the most successful figure in British politics. Net Zero, rooted in the 2008 Act, sits like Brexit across all of political life. And unlike the Brexiteers, he got his opponents to buy into his cause, changing the character and direction of 14 years of Conservative government.
Has the wind shifted on Net Zero?, Energy Analyst Andy Mayer quoted in CityAM
Today the Conservatives, the moral and political architects of the 2050 target, say they’d scrap their law. They’ve seen the light. The Institute of Economic Affairs says the Tories’ announcement is “the first step back to sanity” – pointing out that the Climate Change Act was “the biggest central planning mistake since the Soviet Union’s Five Year Economic Plans.”
Observers respond to Labour’s fracking announcement, Energy Analyst Andy Mayer quoted in Envirotech
News and Views
‘Moral hazard’ warning after £1.5bn government loan guarantee for JLR, Executive Director Tom Clougherty was quoted on the front page of the Financial Times
On Sunday, Tom Clougherty, executive director of the free-market Institute of Economic Affairs think-tank, said a commercial loan underwritten by the government was preferable to other options that had been on the table. Those had included a novel proposal for the government to purchase components temporarily from JLR’s supply chain and sell them on later to the carmaker once production resumed.
However, Clougherty said the “biggest concern” was that the loan guarantee represented a further expansion of the government’s role in economic life.
“Will every cyber attack now result in calls for a taxpayer bailout?” he asked. “Will companies be less inclined to insure themselves against such risks?”
The Welfare Trap Destroying Britain | Fraser Nelson & Danny Kruger Reform MP | IEA Live, Lord Syed Kamall, Dr Stephen Davies, Danny Kruger MP, Fraser Nelson, Edward Davies, IEA YouTube
What is the Chancellor missing about UK economy?, Head of Media Reem Ibrahim wrote for the Daily Express
Instead of placing a bandage over the youth unemployment problem, the Government should look in the mirror. We need a free, flexible and dynamic labour market. We need lower taxes. We need less employment regulation.
We do not need yet another Government-run employment scheme.
Rachel Reeves’s ‘most notable absence’ from keynote speech exposed ahead of looming Labour Budget, Executive Director Tom Clougherty appeared on GB News
Debanking is still wrecking British freedom, trust and enterprise, Editorial Director Dr Kristian Niemietz quoted in The Daily Express
Dr Kristian Niemietz of the Institute of Economic Affairs blamed new laws, saying: “The number of debanking cases has exploded over the past eight years, from the tens of thousands to the hundreds of thousands. This is not because banks suddenly decided in 2017 or 2018 that they would rather have fewer customers.
“It is a response to changes in anti money laundering legislation, which imposes draconian penalties on banks that fail to detect money laundering activities among their customers. As a result, banks have become hyper-cautious, and close down accounts on the slightest suspicion, even if this means penalising thousands of innocent people to catch one single money launderer.”
Scale of dread about tax hikes laid bare, Director of Communications Callum Price was quoted in The Daily Express
Callum Price of the Institute of Economic Affairs said: “The public are right – taxes are going up, but they don’t have to. We already have a generational high tax burden and public spending is out of control.
“The Government should put spending cuts first, and resist punishing businesses and tax payers ever more, which will only keep damaging our economy and perpetuating the doom loop we are in.”
How Did America’s Economy CRUSH Europe Since 2008? - Ep 1 - Land of Opportunity, IEA YouTube
Scrap net-zero laws to save money? Is Elon Musk’s $500 billion immoral? Feat. Reem Ibrahim & Michael Walker | Storm Huntley, Head of Media Reem Ibrahim appeared on Channel 5
Open all hours?, Editorial and Research Fellow Professor Len Shackleton quoted in The Sun
Professor Len Shackleton, an editorial and research fellow at the Institute for Economic Affairs and professor of economics at the University of Buckingham, says the world has changed since a compromise over opening hours was reached in the 1990s.
He believes “the rules should change” to reflect the rise in online shopping, the decline of religion and the UK’s changed demography. He admits that it may promote a gradual shift away from smaller, more expensive shops towards lower-cost opera-tions, but the academic argues this would benefit the consumer.
“It is understandable that individuals and families may be worried about the impact on their own businesses, but this needs thinking through,” he says. “We should not exagger ate the negative impact. A family corner shop still has the advantage of location you can pop in for milk and bread, rather than get in the car and drive to the big supermarket.”
IEA at Conservative Party Conference 2025
Following our presence at Reform Party conference, next month, the IEA team will be heading up to Manchester for Conservative Party Conference.
This house believes Thatcherism was good for Britain, IEA Head of Media Reem Ibrahim and Cleo Watson will be debating Journalists Peter Hitchens and Suzanne Moore at the Emmanuel Centre on Monday 13th October.
 | A guest post by
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Brilliant Kristian. Well observed. We must remember, it’s not state spending that makes growth. It’s not private sector spending either, at least not in their own. It’s ALL spending that powers growth. But what growth? The growth of spending from now to then? Or is it something else??… Reeves needs to grow her tax take. And deludedly she thinks increasing taxes or finding new taxes is the way to go! Wrong!! To grow her tax take she must increase ALL spending…. Remember Kristian, you can’t get more tax unless there is increased spending! As spending triggers taxes. That includes ‘investment’ which is a fancy name for spending money and borrowing which in itself is a calculator for GDP. So that is assumed it’s to be… SPENT!…. Otherwise why borrow?… vat and duty are triggered by spending and funnily so is income tax and NIC. Employers SPENDING on employees is the trigger for tax. So QED… the economy needs?….. yes!!!! SPENDING!…. Now with that need there is a question of…. “Where does the money come from, to make up that extra SPENDING??”…well, there is only one place it can come from. Not the poor who don’t have it and spend theirs already in full. Nor the overstretched middle. Who also spend all theirs each month. NO!… it can only come from those who have…. Too much of it that they don’t spend each month. Yes, the rich. Those who hold money that triggers no tax. None of it enters the tax paying pot as a result of their not spending. So not spending it pays no tax and contributes zero to our tax paying pot!… that’s where it has to come from. Not by taxing the rich, no! Make them SPEND it! Because that way they get something worth the money in return. And when it’s spent around the tax paying community guess what? Many more tax payments are triggered as a consequence Kristian. Isn’t it blatantly obvious. We need our economy to increase by SPENDING the money presently not being spent in it! … in it!!?