Will Reeves be brave enough to take on the eco blockers?

On the eve of the election the then shadow minister without portfolio Nick Thomas-Symonds appeared to be getting Labour’s excuses in early. If an incoming Labour government started to look at the books and realised that things were even worse than they had thought, he said, then the new government’s fiscal policy might have to diverge from the Labour manifesto. He was immediately slapped down by Paul Johnson of the Institute for Fiscal Studies who pointed out that the government’s books are not hidden away in a Whitehall cellar – they already are open to whoever wishes to inspect them.

That didn’t stop Rachel Reeves, however, taking up the same theme in her first speech as Chancellor this morning. What she had seen in the past 72 hours, she said, confirmed her suspicion that the new government is inheriting the worst set of finances of any since the second world war. Given Gordon Brown’s deficit, the fallouts from the winter of discontent and the three-day week, all of which landed on the in-trays of new governments, that is quite a statement. Reeves’ subtext is pretty clear: for years to come, we are going to try to blame everything that goes wrong on the Tories.

But if it was odd to hear Reeves still in electioneering mode, let’s look for some substantive content of her speech. One thing of interest was her statement that she would reform the pensions system to help boost the prospects of UK economies. She didn’t give details – these will be in her first budget, which will be announced in due course – but it would seem that she is toying with reforms which Jeremy Hunt also considered, to try to reverse the long-term decline in the ownership of UK shares by pension funds. In 1990 31.7 per cent of UK company shares were owned by UK pension funds. By 2022 that was down to just 1.6 per cent. What Reeves didn’t say was that this was largely down to her Labour predecessor as Chancellor, Gordon Brown, who forced pension funds to invest more in government bonds. This was to help fund his spending splurge but not so good for UK company shares.

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But it was the planning system which formed the central theme of Reeves’ speech. For too many years, she claimed, it has been in the hands of vested interests. In future, planning decisions will be made in the national interest rather than the local one. It is easy to characterise this as a war on Nimbys (Reeves didn’t quite say this, although a lot of coverage of Labour’s planning policy has used that term). But it rather ignores the fact that the Conservative government already tried this approach by setting up a Planning Inspectorate to consider infrastructure projects of national importance. I’m not saying it worked – otherwise Heathrow might by now have a third runway and fracking wells in Lancashire might be pumping out a good proportion of our national gas needs. But the last government’s efforts did reveal an important thing: it isn’t just local Nimbys who are responsible for Britain’s sclerotic planning system. One of the reasons things don’t get built is legal challenges by environmental groups. We had an example just the other week when the Supreme Court rescinded planning permission granted by planners in Surrey for development of a small oil field near Gatwick – on the grounds that the planners should have considered the carbon emissions which would have been released when the oil went on to be burned.

What does Reeves’ have in mind to prevent developments of all kinds being held up by increasingly well-armed environment groups using legal challenges? She didn’t say. What we do know is that when the Sunak government attempted to get stalled housing developments moving by changing EU-era rules on nitrate neutrality – which prevented developers building new homes unless they could demonstrate they would have no effect on nitrate levels in local watercourses – Labour objected strongly.

Reeves is also going to find out that it isn’t just the planning system which is to blame for low rates of house building. Another factor is the shortage of construction workers – as anyone who has tried to find a bricklayer recently will attest. Labour’s target of building 300,000 new homes a year is no different from the one adopted by Boris Johnson’s government – later dropped after Covid and high interest rates savaged house building rates. Reeves is going to find it hard work to achieve – even if she takes on the Nimbys.