Rachel Reeves has given her backing to the long-awaited expansion of Heathrow airport as she set out her “optimistic” vision for Britain’s economy with a plan for growth based around building “faster and better”.
However, the chancellor’s upbeat message was almost immediately hit by short-term economic woes, with Tesco cutting 400 jobs and Lloyds announcing the closure of 136 branches. This followed Sainsbury cutting 3,000 jobs last week.
Meanwhile, Durham University has slashed 200 jobs and Cardiff University cut 400 posts in the last 72 hours. The job losses were linked to Ms Reeves’s “anti-growth” hike in national insurance contributions and plans to roll out workers’ rights.
To add to her woes, Bank of England governor Andrew Bailey told the Commons Treasury committee that “very big decisions” will be needed to stop Britain’s public debt pile from spiralling higher
Faced with the continued challenges, a beleaguered Ms Reeves told ITV’s Robert Peston: “Look, I’m trying to turn around this economy. It’s not an easy job.”
Speaking immediately after her speech in Oxfordshire, she insisted the job gains from measures she has announced will outweigh job losses.
“Today I announced the third runway at Heathrow potentially creating 100,000 jobs and investment in East Midlands airport, with 2,000 jobs. Investment in an investment zone in Wrexham and Flintshire, 6,000 jobs. So, we can trade numbers. The IMF upgraded the forecast for growth for this year for the UK. Only the UK and the US are in that position.”
However, Tory shadow business secretary Andrew Griffith posted on X: “Yesterday, Lloyd’s [sic] CEO sat down to breakfast with the prime minister and chancellor; 24 hours later Lloyd’s [sic] announce likely job losses and the closure of almost 140 branches. As votes of confidence go, might need a bit of work.”
There were also concerns that the growth measures Ms Reeves announced would not show any benefits for many years – the Heathrow expansion is expected to take at least a decade – while the problems the government faces in the short term have left it on the brink of a recession.
Simon Gleeson, a partner at business advisory firm Blick Rothenberg, warned: “Her narrative that short-term pain is long-term gain is difficult to understand when a third runway will take 10-12 years to build. Furthermore, creating a new Silicon Valley between Oxford and Cambridge is a longer-term play, and a sizable public investment at a time the ‘£22bn black hole’ is still being referenced.”
Shanker Singham, chairman of the Growth Commission, added: “The rhetoric is excellent but words are not enough. Robust action is required. I suspect she is about to find out that wealth is incredibly hard to create but very easy to destroy.”
Ms Reeves’s bold vision of the future was already seeing a backlash from her own party, with Labour transport committee chair Ruth Cadbury, London mayor Sir Sadiq Khan and party donor Dale Vince joining environmental groups in criticising the Heathrow decision.
Sir Sadiq said he remains opposed to the plan because of the “severe impact it will have on noise, air pollution and meeting our climate change targets”.
Even those benefiting from infrastructure building were not happy. One airline boss, Ryanair’s Micheal O’Leary, described Ms Reeves as “Rachel Rubbish” and “a dimwit” because she had refused to go back on a hike in air passenger duty.
Notably, Ms Reeves declined to rule out any further tax rise while Sir Keir Starmer insisted there would be no retreat on boosting workers’ rights which were also being linked to the flurry in job losses.
However, the CBI suggested that trust has been restored and described the speech as “excellent” while other business groups praised the bold long-term vision.
Shevaun Haviland, from the British Chambers of Commerce, said: “Expanding our international airport capacity, investing in modern roads and railways, and rebalancing the planning system all send signals that the UK is building for a better future.”
Sam Richards, from pro-growth campaign group Britain Remade, added: “The chancellor is absolutely right to argue that by making it easier to build we can both get richer and reach net zero carbon emissions.”
The chancellor’s speech was given to an audience of business leaders at a vast factory in Oxfordshire operated by the German company Siemens, which makes the magnets for use in medical scanners.
Speaking near the location of what she hopes will become the UK’s version of Silicon Valley, Ms Reeves warned that for too long the UK has been held up by “naysayers and blockers” preventing major infrastructure projects from going forward.
She mocked the way a £100m bat tunnel had added costs and bureaucracy to the much-maligned High Speed 2 (HS2) rail project, warning that such delays are “unsustainable” going forward.
However, in a sign of disunity, energy secretary Ed Miliband, who has long opposed aviation expansion, was noticeably absent at Prime Minister’s Questions (PMQs) shortly afterwards where Sir Keir hailed the speech.
Both the prime minister and Ms Reeves were hit with questions from the Tories and others over whether they would rein back on anti-growth policies.
There was also criticism of a lack of movement on the UK’s relationship with the EU, as Ms Reeves stuck to the strict Brexit red lines of staying out of the customs union and single market which the Lib Dems warned “put a handbrake on growth”.
The original plan to build a third runway at Heathrow received parliamentary approval in June 2018 but has been delayed by legal challenges and the coronavirus pandemic. The airport needed to secure approval for a Development Consent Order to go ahead with the project.
Ms Reeves said: “I can confirm today that this government supports a third runway at Heathrow and is inviting proposals to be brought forward by the summer.
“We will then take forward a full assessment through the airports national policy statement.
“This will ensure that the project is value for money and our clear expectation is that any associated service transport costs will be financed through private funding. It will ensure that a third runway is delivered in line with our legal, environmental and climate objectives.”
Mr Reeves said that “by backing a third runway at Heathrow we can make Britain the world’s best-connected place to do business”.
Heathrow chief executive Thomas Woldbye described the chancellor’s speech as “the bold, responsible vision the UK needs to thrive in the 21st century”.
The scheme would involve around seven years of construction to produce a third runway and a new terminal. It would also require more than 700 houses to be demolished and the M25 motorway to be moved into a tunnel.
Environmental groups expressed major concerns over the announcement.
Bob Ward, from the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, said airport expansion “should not proceed until the government shows exactly how it will be compatible with the UK’s carbon budgets and net zero target”.
Friends of the Earth’s head of campaigns Rosie Downes warned giving the go-ahead to airport expansion while relying on new technology such as sustainable aviation fuels would be a “reckless gamble”.
