Rachel Reeves Has Quietly Ended the Thatcherite Consensus and Opened the Door to the UK Becoming a Nordic-Style Economy

Support our mission to provide fearless stories about and outside the media system

Packed with exclusive investigations, analysis, and features

SUBSCRIBE TODAY

It’s gone little-noticed by the media, but this week’s Spending Review from the Chancellor made a series of changes, which amount to a fundamental rejection of the Thatcherite economic model Britain has operated under since the 1980s. 

Buried in the report is the news that Starmer’s Government is planning to increase the funding (or ‘capacity’ in the jargon) of a swathe of public-sector financial institutions – including some new ones launched by this Government. 

“The Government is fostering an entrepreneurial state, which will support business investment and catalyse growth. FTs [financial transactions] allow [the] Government to invest alongside the private sector, through equity investments, loans and guarantees” the document states.

This may sound dry, but it opens the door to the UK becoming a much more activist state, something we’ll see much more of through ministers’ (long-awaited) national industrial strategy likely to come out in the next couple of weeks. 

The language of the Spending Review gives a taste of what’s to come: “The Government’s fiscal rules recognise financial assets held by Government, encouraging investments that support growth while generating a return for the Exchequer, [will be] delivered largely through expert public financial institutions including the National Wealth Fund and British Business Bank.”

Rachael Reeves’ changes to fiscal rules — now much looser than first indicated when the party entered office – also allow much more scope for an activist, investing state than before, because her new measure of national debt places much greater value on assets held by the state – such as public-sector stakes in private firms.

The previous rules, the Institute for Government notes, “meant that the Government could appear to improve public indebtedness by selling off these kinds of long-term assets, even if it did so at below their true market value. This created an incentive for Governments to game the rules by, for example, selling the student loan book – as happened in 2017.” 

A major incentive for privatisation has gone, because the rule-book now properly values investments held by the state, not as liabilities, but as assets.

The changes have led to the new Government increasing the financial firepower of publicly-owned financial institutions by around £40 billion – or 40% – this Parliament, to £137 billion.

UPDATE

The ‘Millionaire Exodus’ the UK Media Told You About Never Actually Happened

The equivalent of 30 stories a day were published about an exodus of wealthy people that a new study finds was “non existent”

Josiah Mortimer

Rachael Reeves will want to be remembered for this – her desire to “foster an entrepreneurial state” (my italics). In other words, to Scandi-fy the UK economy. More Norway, less USA.   

The Government will now proudly expand “equity investments, loans and guarantees” – for example. 

There are a few public-sector firms which will be pivotal to this mission. And the big-hitters are perhaps unexpected.

One new publicly-owned institution has received a lot of attention. Great British Energy – energy sec Ed Miliband’s beloved creation – is launching with £4 billion capacity to invest in (and build) renewable energy projects across the country. Public funding for Great British Energy-Nuclear (a rebrand – or ‘level up’ – from Boris Johnson’s Great British Nuclear) takes the total for the two up to £8.3bn this Parliament, with the state taking a much bigger role in developing nuclear energy. 

It’s a totem for the Government’s green energy investment push. But it could end up investing less in renewable energy projects than other less-reported publicly-owned bodies. 

The British Business Bank is getting far more financial fire-power – £26bn this Parliament –  compared to GBE’s £4bn.

It’s an extra £10.3 billion capacity under this Government, a 67% increase from under the Conservatives. 

Keir Starmer Plans to Crack Down on Political Interference by Foreign Billionaire Donors

The Prime Minister is under pressure to close legal loopholes that would allow tech billionaire and Donald Trump aide Elon Musk to funnel millions of dollars into right-wing political parties in the UK

Olly Haynes

Most of that will be loans and equity in private firms. In other words, the state becoming partners in commercial enterprises – fuelling start-ups and promising industries. 

UK Export Finance (UKEF) is another winner. That’s the ministerial body which provides guarantees for UK goods and services exporters to win business abroad. In doing so, it encourages UK firms to invest overseas by providing insurance and protections against loss. 

That’s getting £20 billion additional capacity this Parliament, under Labour’s plans, a 33% boost to its total capacity from £60bn to £80bn.

Finally, we have the National Wealth Fund (NWF), which receives £5.8 billion extra. It’s ‘extra’, rather than ‘new’, as it’s actually a re-branding of a Boris Johnson post-Brexit institution, the UK Infrastructure Bank. But its clout is rising to £27.8 billion, making it the second-largest of the four key publicly-owned financial institutions being bolstered by Labour. 

Its spending power is heavily weighted toward loans/equity (£5.8bn) with no guarantee component. In simple terms, that means it’s prioritising taking direct stakes in private firms. Its work will be focused on strategic industrial investments, “helping deliver the Government’s growth and clean energy missions, generating a return for the taxpayer and crowding in private capital.” 

All of these indicate a shift in Britain’s industrial strategy, one promised by Labour but soon bearing fruit: a move to a more social-democratic economy. 

When you look at the big picture – nationalising passenger rail services, nationalising the national energy systems operator (NESO), big new Government spending on AI (‘’up to £500 million for the creation of a new UK Sovereign AI Unit…to support the emergence of national AI champions”), and a near-doubling of spending on social housing over 10 years – a pattern emerges. 

This is a Government that is shifting the dial away from neoliberal, US-style economics – and looking more towards our neighbours on the North Sea. 

Subscribers Get More from JOSIAH

Josiah Mortimer also writes the On the Ground column, exclusive to the print edition of Byline Times.

So for more from him…

Subscribe to Byline Times