What do Rachel Reeves’ plans for growth mean for the economy?
As the Chancellor announces a raft of policies to boost economic growth, PA news agency explains what that means in real terms.
Chancellor Rachel Reeves has laid out fresh plans to grow the economy.
In a speech on Wednesday, she pledged to turn Oxford and Cambridge into “Europe’s Silicon Valley”, while also backing a third runway at Heathrow Airport.
She said the plans are part of her “fight” for economic growth across the UK.
But what does Ms Reeves mean by “growth”, and how does it affect normal people? The PA news agency explains.
– What does the Chancellor mean by ‘growth’?
When Rachel Reeves talks about growth, she is broadly talking about boosting the economy and, in doing so, making people and businesses a bit richer.
The main measurement we have for this is gross domestic product (GDP).
That refers to all the spending by companies, governments and people in a country.
But GDP has been stagnant since Labour won the election last year – up just a few percentage points since July.
– How does growth affect me?
If GDP is rising, people are earning and spending more money – and they are also paying more tax.
This means the Government has more cash to spend on improving things which actually affect everybody’s lives, like schools, police and hospitals.
When the economy shrinks, these things tend to get worse, because there is less money to spend on them.
Ms Reeves said on Wednesday that the Government will have succeeded “when working people are better off”.
– What is the Government doing about it?
Labour has already put a big emphasis on attracting investment into the UK to try to stimulate more growth.
It held a summit last October, attended by some of the biggest finance firms in the world and aimed at attracting investment into the UK.
Projects like expanding Heathrow Airport and creating a Silicon Valley-like technology hub between Oxford and Cambridge are designed to do the same.
Ms Reeves said the Heathrow expansion is “badly needed” because “for decades its growth has been constrained”.
She also pointed to new rules coming in the spring to speed up the planning system, saying decisions have previously been too slow and “ridiculous”.
– Didn’t the Government just raise taxes on businesses?
Yes. The Labour Party announced in October that it would increase national insurance contributions (NICs) for companies.
Some of the country’s biggest employers – like supermarkets and big retailers – have raised concerns about the policy, saying it makes it more expensive to hire people.
Sainsbury’s announced thousands of job cuts last week, with some of them understood to be linked to the rise in NICs.
Ministers argue that the tax is designed to raise money to pay for improving things like the NHS, public transport and other services which, they hope, will help get the economy growing again.
– What about regulation?
An “action plan” intended to make regulation “work much better for our economy” will be published in March, Ms Reeves said.
Regulators are the public bodies which make the rules for certain industries.
There are regulators for the finance sector, energy companies, pensions and many more.
Ministers say some of these regulators have made it too difficult for companies to do business in recent years by making too many rules.
The Government even replaced the boss of the watchdog Competition and Markets Authority earlier this month, arguing that the organisation was stopping too many deals.
