ALEX BRUMMER: Reeves is right to target house building - but I fear that she underestimates the wrecking power of Nimbys and green activists
The elegant Churchill Room at His Majesty's Revenue & Customs is used by the Chancellor of the Exchequer only on the grandest of occasions. The new incumbent at Number 11, Rachel Reeves, Britain's first female Chancellor, lost no time in taking advantage of one of Whitehall's finest backdrops.
Silhouetted against a red-for-Labour screen, she opted for a sober black suit, forgoing the colourful outfits of the election campaign. Reeves portrayed herself as a woman of action as she unveiled her plans to 'fix the foundations of the economy' just 72 hours after taking over the fiscal hot seat. Her Treasury team had assembled an audience of City grandees and key business leaders in an effort to win their support from the outset.
At the core of her mission is a new approach to growth. She and Labour are to rip up planning laws and regulatory protections as the first step in an agenda to get the economy moving faster.
Silhouetted against a red-for-Labour screen, in a sober black suit, Rachel Reeves unveiled her plans to 'fix the foundations of the economy'
Deputy Prime Minister Angela Rayner joined the gathering in Whitehall for Reeves's speech
She is vowing to break through the status quo when it comes to housing and construction. As she unsheathed her ambitious plan you could almost feel the blood pressure of those who voted Labour in the shires rising.
The prospect of a government willing to concrete over parts of the Green Belt, to despoil the pastoral beauty of Britain with onshore windfarms and giant pylons for a new, more powerful national grid may in time fill them with regret.
Joining the gathering in Whitehall was Deputy Prime Minister Angela Rayner who managed a wave and a smile to the audience.
Among the rich and powerful who had cleared their crowded Monday morning calendars was the tall, dominating figure of Richard Gnodde, international chief executive of Goldman Sachs and arguably the most influential person in the City after the Governor of the Bank of England.
Also present was the chairman of the insurance behemoth Prudential and former Labour minister Baroness (Shriti) Vadera, alongside Mark Wild, the new boss of the HS2 high speed rail link between London and Birmingham and the brightly attired entrepreneur Martha Lane Fox.
Reeves refused to let the reality of an improving economic situation get in her way, and opened her remarks with a caustic demolition of her Tory predecessors. She charged them with leaving the economy in its worst state since the Second World War. Over the weekend she had asked the Treasury to assess the 'dire' legacy and their instant report, according to the Chancellor's highly politicised analysis, confirmed the situation.
All of this is going to change, she insists, by way of a huge push to build more houses, an end to instability and the creation of a National Wealth Fund to unlock billions in business investment which will lead to millions of jobs.
Nowhere in her account was any recognition of the fact that the past 14 years have been among the most difficult of modern times to navigate, as a succession of Tory Chancellors were faced with the once-in-a-generation catastrophe of Covid-19 as well as the cost of living crisis caused by Russia's bloody assault on Ukraine.
Nor did she point out that her predecessors as Labour Chancellors - Gordon Brown and the late Alistair Darling - left office in 2010 bequeathing an appallingly moribund economy after the great financial crisis of 2008-9.
The fact is that the economic legacy Rachel Reeves has inherited is much better than she could have been imagined, with inflation on target at 2 per cent and with growth of 0.7 per cent in the first quarter of the year the fastest among the G7 group of countries. Interest rates, too, are all but certain to fall from their current 5.25 per cent level as soon as next month.
These better-than-expected economic circumstances underline why Reeves and Labour are pushing for house-building and construction, which are recognised as key drivers of economic growth. Every time a house is completed and bought, consumers up their spending on decorations, white goods and furnishing, adding to retail sales and boosting the broader economy.
In her speech yesterday, the Chancellor announced she would restore 'mandatory' house-building targets to galvanise regional, local and community authorities into constructing 1.5m homes over the current five-year Parliament.
Reeves seems convinced that new national powers and mandatory targets will make a difference. But she has a formidable task ahead because house building and construction are fraught with problems.
No government has managed to build more than 300,000 new homes a year in recent times. Moreover, her intention to unlock planning restrictions is going to prove extremely difficult.
It is a noble cause, and Reeves is right to embrace it. But I fear she greatly underestimates the problem. Planning and environmental requirements, regulations and obstacles have for many years defeated the government's greatest ambitions.
The main reason, for example, why the northern legs of HS2 to Leeds and Manchester had to be axed was that planning restrictions made constructing the line too expensive. Similarly, after more than three decades, Heathrow still has no prospect of getting its third runway because of planning and environmental objections. Its rival, Frankfurt airport, has four.
Moreover, building houses on brown field and grey field sites, as Reeves proposes, sounds terrific. But private sector builders, upon whom the Government will be relying, steer clear of these sites because of the vast potential clean-up costs of working on abandoned industrial sites and wasteland.
Better-than-expected economic circumstances underline why Reeves and Labour are pushing for house-building and construction
Every time a house is completed and bought, consumers up their spending on decorations, white goods and furnishing adding to retail sales and boosting the broader economy
My own belief is that Reeves, with her narrow focus on boosting housing and onshore wind - which will again run into huge planning difficulties - is missing areas where Britain has a real competitive edge.
The Chancellor is right to point out that turmoil inside the Tory government has been detrimental to output. What she has failed to embrace, however, by focusing on housing, is what a former Labour prime minister Harold Wilson famously described as the 'white heat' of technology. Britain is the pharmaceutical, the AI and financial technology powerhouse of Europe, and competes in these advanced industries on the world stage.
Anyone hoping to hear the new Chancellor grasp this opportunity to boost such industries was disappointed. Yes, she would makes clear that tomorrow she is meeting former governor of the Bank of England Mark Carney who is the brains behind the National Wealth Fund which will doubtless back some of the UK's cutting-edge technologies.
But as Mrs Thatcher's favourite think-tank, the free-market Institute for Economic Affairs points out, bureaucrats doling out relatively small amounts of money are unlikely to make any difference.
One cannot but admire the dynamism which the nation's first female Chancellor is going about her work. She is clear, enthusiastic and determined, and strives to involve business and finance in her changes and carry them along with her.
But I fear she underestimates the sheer power of nimbyism, of local people who understandably don't want housing estates in their back yard, and the wrecking power of green and environmental activists determined to see off every single housing, science or commercial development that is proposed. Everyone in the UK wants to see faster growth, stronger public finances and less borrowing and debt.
To achieve these, we need lower taxes and less intrusive regulation which unlocks capital for investment. On her first big outing, our freshly minted and activist Chancellor found no role for any of that.
