By the IMF’s reckoning, stabilising debt levels by 2029/30 would require around a £30bn improvement in the primary balance – the difference between the governments’ revenue and its non-interest expenditure.
This means that the Labour government will instead be looking at ways it can address economic growth without heavy spending requirements, with planning reform high on the agenda as a result.
From an investment perspective, this has been widely welcomed by developers.
Share prices have responded positively, and there is now a lot of commentary about whether or not housebuilders are over the worst of their earnings squeeze.
But the supply side is only one half of the battle, and the housebuilders are likely to struggle for as long as interest rates remain high as they balance price and volumes of homes built.
Five-year fixed rate mortgages are currently averaging 4.99 per cent, making home affordability still totally out of reach.
Supply must rise in line with demand and as such lower interest rates and meaningful help for first-time buyers is going to be needed alongside planning reform.
As ever, the as yet unknown details will be crucial in revealing the realistic success of making headway in such an emotive policy area that has been a persistent and growing brake on the UK economy.
However the alignment with recommendations from the IMF and the speed by which Reeves’ seemingly plans to act, is an encouraging start.
Time is ticking
Labour is absolutely right to look for sustainable ways to bring about economic growth.
The UK has been in a slumber ever since the financial crisis of 2007-08.
The past decade saw a missed opportunity for investment at incredibly low interest rates and the public balance sheet has been decimated by Covid.
The major problem facing Labour is that none of these are quick fixes.
Along with the planning reforms and new national wealth fund, it has swiftly abolished the ban on onshore wind farms.
If the UK is to meet its net-zero targets then these sources of energy will be crucial, but currently they face a 12-year wait to connect to the grid.
National Grid intends to speed these connection times up, but it is once again growth that is likely to take time to come through.
Furthermore, Labour states it will tackle economic activity and get people back to work – an issue that has become symbolic of the UK’s economic struggles of late.
The UK is one of only six countries of 38 in the OECD whose employment rate has fallen since 2019 – it stood at 74.3 per cent in early 2024, having been more than 79 per cent in late 2019.
This has been partly driven by an increase in ill-health among working-age adults with unemployment in young people rising noticeably as a result.
