I have criticised the Conservative Party a lot this election. Now it is time to direct some of my focus on the (other) major social democratic party. Do not be fooled by Labour’s National Wealth Fund and the party’s proposals for growth. While Labour has made some welcome noises about wanting to avoid a return to tax and spend socialism, their actual proposals for economic growth amount to little more than “real industrial strategy has never been tried”, with a few nasty surprises hidden within. 

The party has been at pains to make clear that it will not increase taxes on working people, and will stick within the spending recommendations of the Office for Budget Responsibility. Despite some back and forth over increases to capital gains tax or taxes on pensions, Labour has managed to maintain a “steady as she goes” approach to fiscal policy, for now, with the Conservatives only making minor inroads with their suggestions of a “£2,000 tax bombshell” under Labour. 

This is part of Labour’s strategy to win over the Middle England voters who are Labour’s path to power, but who might not trust the party on the economy and the public finances. They have repeatedly talked about growth, and have claimed that the way they shall achieve it will be through planning reform. Perhaps they have taken a leaf out of Liz Truss’s book, or decided that Robert Jenrick’s planning reforms from 2020, which they called a “developer’s charter”, are actually a route to prosperity after all. 

Here, they are talking some sense. They have made a great deal of the need to speed up the process to award planning permission for things like data centres, transport infrastructure and new sources of energy. They have suggested that central government should have greater power to decide planning permissions for these types of projects, over local councils. Making it easier to build these projects is fine, but Labour’s approach makes a mistake typical of almost all industrial strategies. Instead of getting the basics right — the fundamentals of planning, energy, and tax policy — they are proposing special processes for special classes of infrastructure. 

While a special planning regime for preferred types of projects is annoying, it is by no means disastrous. Far worse is Labour’s proposed National Wealth Fund, which they expect to fund to the tune of £7 billion, which will be spent on projects up and down the country. This is going to be partly funded by an increased windfall tax on the oil and gas industry, and from money that Labour hope to unlock from the private sector, such as institutional investors and pension funds. This money will be diverted to Net Zero-related industrial projects, the decarbonisation of supply chains, and the manufacture of green hydrogen. This is supposed to create 650,000 “green jobs”, and achieve Labour’s vision of totally clean power by 2023. This was tried by the SNP, with disastrous results.

It isn’t just industrial strategy-sceptics who don’t like public money being wasted on projects which generate poor returns who should fear this policy. Rachel Reeves, Shadow Chancellor, wants to take the country’s pension funds — who are tasked with making sure we can all enjoy a healthy retirement — and force them to spend our money on politically-favoured projects. Whether it is green industry, nationalised car manufacturers, or declining coalfields receiving public subsidy, the effect is the same: unproductive incumbents hoover up subsidy, innovators are crowded out, and eventually everyone pays a high price for the following crash. 

The added danger, today, is that this kind of industrial strategy is being turbocharged by two new philosophies: Diversity, Equity and Inclusion rules, and Environmental, Social and Governance principles. This is what woke capitalism looks like in practice, and a new Legatum Institute paper on the subject exposes how dangerous it is to prosperity. 

… the message is clear: private enterprise only exists to advance political goals

The Labour Party manifesto is shot through with this kind of thinking. From the National Wealth Fund, to the Race Equality Act, and Labour’s plans to mandate UK-regulated financial institutions to implement Net Zero transition plans, the message is clear: private enterprise only exists to advance political goals. 

Let’s look at what this actually means. The National Wealth Fund will divert private and public capital to projects which might otherwise be able to be funded through market forces, given the right regulatory environment, or projects which offer no economic benefit at all. The Race Equality Act, which is expected to mandate diversity-related hiring, reporting, and pay requirements, will end meritocracy in the workplace, and will create a divisive, legalistic working environment. Net Zero transition plans will have huge costs on the economy. They won’t just impose administrative costs on businesses, they will have real-world consequences: businesses will lose access to finance, farmers will be regulated out of existence, and aspirant homeowners won’t be able to get a mortgage to buy a home with leaky windows. This is a recipe for poverty, not prosperity, and Labour must be scrutinised. 

The great tragedy is that there is plenty of evidence of the failure of these ideas around the world. Labour is copying “Bidenomics” with its green industrial strategy. But Bidenomics is failing in America: inflation is increasing, and businesses are tied up in ESG knots to meet the impossible compliance requirements for government subsidy. In Europe, the public are revolting against the EU’s Net Zero regulations. The hype and excitement about ESG investment from a few years ago has disappeared, and an increasing amount of new evidence has been produced which shows its fundamental flaws. 

Instead of removing the real barriers to growth and prosperity in the UK — complicated and unpredictable planning rules, expensive energy, high taxes, and mass immigration — Labour’s economic growth agenda amounts to special rules for favoured sectors, the imposition of grievance and identity politics in all workplaces, and the politicisation of all businesses. It won’t save the planet, it won’t save the economy, and it certainly won’t be pretty.