Rachel Reeves has called on ministers to seize new opportunities for raising living standards, telling MPs that the country needs to go “further and faster” to boost growth.
Amid concerns that an intense focus on economic expansion could overshadow the government’s net zero commitments, Downing Street insisted that its plans for stimulating the economy “go hand in hand” with environmental progress.
Reeves, the chancellor, has sparked unease among some Labour MPs and environmental campaigners by describing growth as a top priority even if it raises questions about the pace of tackling climate change. She is set to clarify her approach in a major speech on Wednesday, where she will outline proposals to reform planning rules, speed up infrastructure projects and potentially support airport expansion—despite warnings that this could breach the UK’s legally binding carbon targets.
Addressing the parliamentary Labour party, Reeves acknowledged there were “no easy routes out” to grow the economy. She urged the government to shift away from saying “no” to major projects and to start “saying yes” to measures that spur wealth creation. While conceding that cost of living pressures remain severe, she argued that only by ramping up economic growth can the government hope to tackle them effectively.
Downing Street quickly moved to reassure those worried about the environmental ramifications of prioritising growth. A spokesperson for Keir Starmer insisted that net zero and a robust economy are complementary, pointing to the significant potential of green jobs and the large amounts of private sector investment that clean energy could attract. Critics remain uneasy, however, with Labour backbenchers such as Barry Gardiner challenging the rhetoric of putting decarbonisation in conflict with growth. Ruth Cadbury, the MP for Brentford and Isleworth, highlighted continued doubts over the expansion of Heathrow Airport, saying it may not fit a broader nationwide growth plan and also raises local concerns about noise and pollution.
Ed Miliband, the energy and climate change secretary, who recently stated he would not resign over the possibility of supporting a third runway at Heathrow, assured the House of Lords that “no contradiction” exists between net zero and growth. He further emphasised that any aviation expansion must be compatible with the UK’s carbon budgets, adding that if those targets cannot be met, plans would not proceed.
In a related push to boost the economy, Reeves explained that she would allow businesses to use surplus funds from certain final salary pension schemes for fresh investments. Around three-quarters of such schemes—known as defined benefit schemes—are in surplus, collectively amounting to about £160bn. Historically, legislative hurdles have made it difficult for companies to access this extra capital. In her Mansion House speech, Reeves also promoted the idea of consolidating pension funds into “megafunds,” merging multiple local authority pension schemes into larger pots capable of channelling investment into strategic projects. Although trustees often worry that giving businesses direct access to surpluses could endanger the safety of pension schemes, the government has proposed regulatory safeguards that would allow trustees to block any moves undermining a fund’s security.
As the government works to strike a delicate balance between driving growth and maintaining climate commitments, Reeves’s forthcoming speech will provide more details of the plan, and explain how it will respond to both the cost of living crisis and the compelling need to deliver on net zero targets.