Growth is competing with the tasks of other Labor Party

Digest opened free editor

Rola Khaleda, FT editor, chooses her favorite stories in this weekly newsletter.

The writer is the next director of the Institute of Financial Studies

The cloud has blocked the spending on Rachel Reeves, the big differentials. The advisor shaken through an investment splash through a number of departments, interspersed with the verification of the name for the electoral districts that will benefit from specific projects and a reminder of all the jobs that will be supported.

We knew that the government would increase investment. It has always been a major part of how labor enhanced the fulfillment of their first mission of increasing economic growth. What we did not know is that such a large share – which is more than 60 percent – of additional spending will go to defense and zero.

Focusing on these areas may increase growth. But it is wrong to believe that the rate of growth is higher – not just a greater economy but it grows every year – is an inevitable result. Just building an weapons stock will not push growth. Support families to switch to heat pumps only means producing the same thing that we already do (warm homes) in a cleaner way, and perhaps more expensive.

It is also wrong to think that investments are growing for growth just because they create job opportunities. Outside the recession, it means more functions in one area mostly less functions elsewhere. Instead of focusing on the amount of work needed to produce something, we must focus on the amount of output that each worker can create. We have a production problem, not a functional problem.

The industrial strategy that was released last week determines the investments aimed at putting the UK as a pioneer in the sectors that have been determined as high -growth capabilities, including defense and clean energy. The targeted investments – especially those that encourage innovation – have the ability to improve growth and direct workers towards more productive areas. But if the government does not want more ability to defend, will investing in weapons and nuclear submarines, even that innovative, will be the best way to enhance economic growth? It seems unlikely.

The government can be more confident that investing in infrastructure, research and development will increase growth. The UK has long been a lack of transportation infrastructure for other advanced economies. The best delivery of people and places and stimulation to more innovation is a way to higher productivity.

The Ministry of Science, Innovation and Technology will get an increase of 3.8 billion pounds in its annual capital budget by the end of Parliament, which must witness inflation in spending. But the transport department gets only 1.8 billion pounds. The low spending on HS2 will lead to the liberalization of resources for other projects, but the total transport budget gets a real reduction. Both settlements are dwarfed by an additional 14 billion pounds of defense and 9 billion pounds to go to the Ministry of Energy Security and Safi Zero.

We must be careful of the narration that makes it look as if there were no differentials. More investment for defense and clean energy means less elsewhere. As the industrial strategy itself recognizes, growth is not the only goal. Sir Care Starmer also has other priorities, and does not come cheap.

After choosing the path you want to walk, the government must now turn its attention to ensuring the delivery of all projects friendly to growth on time and in the budget. This is really a top priority.

The government is keen on the cumulative trumpet 113 billion pounds from the additional investment that will be made on this parliament, (compared to the plans set by conservatives in early 2024). They do not announce the additional borrowing of 140 billion pounds, which is expected during the same period. Increased government investment makes growth higher. High debts and benefits interest payments make growth more necessary.