Labour’s Four Economic Camps: From Reeves to Manchesterism

Wes Streeting has not launched a leadership challenge against Keir Starmer, but he called for a “battle of ideas” about the government’s future direction.

At least four overlapping Labour camps have emerged on economic policy, generating a flurry of proposals from which leadership contenders could choose.

Chancellor Rachel Reeves cited Thursday’s stronger-than-expected 0.6% first-quarter growth as evidence she has “the right plan.”

That plan, outlined in her Mais lecture earlier this year, includes embracing AI opportunities, devolving more tax revenues to metro mayors, and seeking closer EU trade ties.

Reeves rewrote fiscal rules to allow more public borrowing for investment while aiming to balance day-to-day spending with tax revenues, raising taxes sharply on higher earners and businesses.

Since President Donald Trump launched his “war on Iran,” which Reeves called “folly,” she insisted any household support must target the less well-off, not the broad approach Liz Truss took in 2022.

Reeves is expected next week to outline how she will shield consumers from the coming inflationary shock.

Her allies argue that a change of personnel at No 11 could trigger a bond market crisis, raising government borrowing costs.

The Growth Group, chaired by Milton Keynes North MP Chris Curtis — who called Streeting a “once in a generation talent” — just published a policy prospectus titled “An Honest Day: a new economic settlement for Britain.”

The prospectus argues that too much UK wealth accrues simply from holding assets.

Echoing the “abundance” agenda of Ezra Klein and Derek Thompson, it blames state failures such as restrictive planning regulations and energy pricing that ration assets.

The Growth Group calls on the government to lift the tax burden on workers and cut the cost of basic essentials.

It wants to equalize capital gains and income tax rates, completing a shift Reeves began, and use the extra revenue to fund a 2p cut in employee national insurance.

It argues for cutting regulations in many markets but ending state collusion in “fake market capitalism” for essential services like water.

It calls for letting long-troubled Thames Water collapse into government control. “The message should be unmistakable: the public is not the backstop for owners who treated essential infrastructure as a financial chip in a casino where they never lose. In essential services, ownership comes with obligations.”

Other policies include devolving power to mayoralties and reining in the Treasury, which it says acts as “the unaccountable veto‐player over the elected programme.”

Labour MPs from the soft-left Tribune Group, including former transport secretary Louise Haigh and backbencher Yuan Yang, gave a similar diagnosis in the journal Renewal.

They argued that “for too many people, hard work no longer guarantees rising living standards” and that “growth has been too weak, too uneven, and too often driven by asset inflation rather than productive investment.”

The Tribune Group emphasizes more borrowing to invest, with development corporations for the Oxford-Cambridge corridor and new towns able to borrow directly.

Haigh argues fiscal rules should switch to a 10-year horizon to account for long-term investment benefits, but only when the current budget is balanced to avoid spooking bond markets.

Her tax reforms are more radical than the Growth Group’s: scrapping stamp duty, cutting council tax for a property and land tax, closing inheritance tax loopholes, and moving capital gains rates closer to income tax.

Yang argues that depressed consumer demand holds back growth. She urges cutting household costs to ease the cost-of-living crisis and boost demand, echoing Reeves’ last budget but going further.

Yang suggests reforming energy pricing to cut poorer households’ bills, capping bus fares, and clamping down on rip-off property management fees for leaseholders.

Potential soft-left candidates such as Angela Rayner, Andy Burnham, or Ed Miliband might draw on these ideas.

Left-wing think tanks including the New Economics Foundation and Joseph Rowntree Foundation have published radical proposals, with the latter advocating rent controls.

Mat Lawrence, director of Common Wealth, wrote in the New Statesman on “Manchesterism,” drawing lessons from Burnham’s mayoralty for the wider UK.

A preview of a report by Burnham-aligned campaign group Mainstream, it argues for a “Productive State” doing more directly through public ownership, such as building social housing.

Like the Growth Group, Mainstream wants Thames Water under government special administration; like Tribune, it calls for public corporations to borrow directly for investment.

But Mainstream sees this as part of a project for the state to take over where the private sector fails, citing economist John Maynard Keynes’ call for “somewhat comprehensive socialisation of investment.”

Lawrence cites Burnham’s transport reforms: “The Bee Network’s restoration of bus routes in Manchester that private operators had abandoned is the practical demonstration: where private calculation withdraws, public provision steps in and serves.”

The Bee Network increased passenger numbers and reduced costs, Lawrence argues.

The suggestion is to apply a similar approach to energy, water, housing, and care — “what has been done for buses can be done with similar ambition.”

Burnham is also expected to base his economic pitch on bolder EU negotiations, with many Labour MPs wanting the government to flex its manifesto constraints and seek a closer deal.