Keir Starmer is treading a narrow path. After a challenging first 100 days in government, the prime minister has an opportunity on Monday to relaunch Labour’s central mission: to restore economic growth.
But as some of the world’s most powerful financiers fly into London for the new government’s inaugural international investment summit, they do so with Starmer’s cabinet at odds about how that mission should be achieved.
On the one hand, the prime minister cutting adrift his transport secretary, Louise Haigh after she branded P&O Ferries a “rogue operator” might appear to be another classic Westminster squabble. Yet at its heart lies a tension in the Labour economic project – between driving growth and ensuring the proceeds are shared more evenly.
In welcoming hundreds of company bosses to the London summit this week, the prime minister will be seeking to get the biggest beasts in modern capitalism behind his plan to get Britain’s economy growing at the fastest sustained rate in the G7. The bosses of Goldman Sachs, BlackRock and Google will be among those attending.
At a time when the public finances are in a tight spot – ahead of a tough budget for Rachel Reeves in two weeks – that may not be such a bad idea. Even if the chancellor relaxes her self-imposed fiscal rules, as is widely expected, she is unlikely to add significantly to borrowing for investment, fearing a negative response in financial markets.
Most economists believe business investment is crucial to unlocking gains in productivity and driving economic growth. For decades the UK has trailed the G7 on investment spending, particularly since the 2008 financial crisis – matching a period when living standards have stagnated, showing there is scope for improvement.
However, there is discomfort within Labour’s ranks over the involvement of certain companies. Some firms flying in for Monday’s event have been criticised for locking Britain into a trap of high inequality. Even if they promise to invest, would the benefits be felt evenly?
Two in particular are raising eyebrows: DP World, the Dubai-based owner of P&O Ferries, and Macquarie, the Australian investment firm nicknamed the “vampire kangaroo”, which previously owned Thames Water.
The prime minister could also stoke concern by offering to investors attending the summit to “do everything” in his power to galvanise growth by getting rid of red tape and regulation that “needlessly holds back investment”.
Despite this, some businesses still grumble about how open Labour is to investment.
Some bosses attending the summit are concerned they will do so before Reeves’ budget targets companies, wealthy individuals and private equity executives with higher tax bills. After all, ministers have not ruled out raising employers’ national insurance contributions.
Last week, Starmer hailed Labour’s “new deal” for working people as the biggest upgrade in workers’ rights in a generation. Though it was attacked by some business leaders as an anti-growth charter that would damage Britain, the prime minister believes the measures are vital.
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The plan acknowledges that modern capitalism doesn’t always work without guardrails – as shown by the rise of zero-hours contracts, more than a decade of sluggish wage growth and rising in-work poverty.
Labour will also prioritise investment alongside the private sector, through the National Wealth Fund and GB Energy, with the idea that co-investing can help leverage private investment and ensure that the state shares in some of the proceeds of growth.
For all that the prime minister is critical of red tape and regulation, perhaps the government would acknowledge that growth at all costs is not a place where Labour would be comfortable after all.
But at a summit where Starmer will welcome big business to London to encourage them to invest in Britain, that is a delicate balancing act to strike.