There are three speeches in Reeves’ Mais Lecture – which one will she govern with?


Rachel Reeves has given the annual Mais Lecture at Bayes Business School, a rite of passage for Chancellors and a chance to show their governing philosophy. Reeves’ speech is undoubtedly the most important articulation of Labour’s strategy since Keir Starmer’s speech last year outlining his five missions. It was also unashamedly intellectual at a time when one of the big criticisms in politics is that we are lacking big ideas. 

There were three big narratives at the heart of the speech and each of them could have been a speech in itself with a profound impact on the future of the UK’s economy and society. The question is, which one will Labour govern with? 

Speech number 1: Disembedded capitalism 

As someone who fell in love with Karl Polyani’s The Great Transformation, it was heartening that Reeves referenced this work. Polanyi is a thinker that is hard to categorise, blending elements of Marxism, Christian socialism and conservatism together. At the centre of Polyani’s work is an understanding that markets seek to turn all things into products, including people and nature, but ultimately this is ‘fictitious’. Markets should serve society, not society serve the market. When we let capitalism treat people as products, not as citizens, it becomes ‘disembedded’ from society and this leads to a ‘double movement’ – a reaction from society to protect itself. This reaction can be good (e.g. creating a modern social security system) or bad (e.g. fascism or communism).

Reeves is not alone in thinking this. There is a growing school of thought that capitalism and business has become disembedded from society, including former Governor of the Bank of England, Mark Carney, who she referenced in the speech. We’ve also seen the growth of ‘purpose-led’ businesses that consciously seek to put social and environmental good ahead of profit, a subject of Demos’ recent report – The Purpose Dividend.

However, Reeves does not take this argument forward. If markets have become disembedded from society, how can they be re-embedded? In our report, the Purpose Dividend, we talked about reforming company law to realign markets with our values. Keir Starmer has committed to reforming company law as well, but we’ve not seen a lot of detail on this. But the speech did not talk about the missions, company law reform or anything that would bring markets and society back together. 

Speech number two: A New Interventionism?

One part of the lecture that received a lot of attention was Reeves’ critique of Thatcher’s influential Chancellor Nigel Lawson. In summary, her view was that Nigel Lawson had underestimated the ability of the state to shape the economy and where he did act it was too much on microeconomic policy (e.g. tax cuts, regulation etc. to shape incentives) and ignored the macroeconomic picture. It’s a good critique. The obvious solution is that the state needs to be more interventionist, not assuming that incentives alone will lead to the outcomes it is looking for and embedding resilience into the national economy.

Reeves does call for a more active state, echoing Peter Mandelson, but it is a myth to say that the state can choose to be inactive or active. Every state is active. Even those that claimed that they were keeping out of the economy, like Lawson, were actually actively shaping it through creating the tax, regulatory and monetary systems that would favour ‘their kind’ of business. As Karl Polayni famously quipped, “laissez-faire was planned”.

Labour’s answer is to keep talking about a partnership with business, but we still do not really know what that means in practice. Reeves says it is not the state “directing industrial development” but recognising “the informational and capacity constraints of government [and] working in genuine partnership with business to identify the barriers and opportunities they face”. The truth is that every government for forty years would say that it has been doing that. We know the problems with the British economy – low (public and private) investment, lack of investment in skills, a narrow economic base (which Reeves acknowledges) all translate into low productivity. Is Labour going to intervene to achieve this change? It is still hard to say.

Speech number three: It’s stability, stupid 

The final element of Reeves’ lecture can be summed up simply as “it’s stability, stupid”. Global financial crisis, austerity, Brexit, pandemic, constant leadership change. Reeves says like the 1970s, we are in a state of flux. Until we create stability we can’t have growth. This was the strongest part of the lecture and clearly the subject that Reeves has thought most about.

One Budget every year (proposed by Philip Hammond). A Business Tax Roadmap (last published in 2016 by George Osborne). Capping Corporation Tax at the lowest rate in the G7 (low corporation tax was Osbornomics 101). Strengthening the OBR (created by George Osborne). Locking in the fiscal rules (Brown & Osborne).

The irony is that the policy environment has been relatively stable since the 1980s. Low tax, light-touch regulation, flexible labour markets and open markets. The only major disruption has been Brexit, and even that has led to a restatement of Britain as an open, global, trading country. The PMs and the Chancellors change, but this broad orientation does not. The policy choice has been for the state to let this system work its way through and this consensus has built into it the instability that Reeves is seeking to combat, as she notes herself by highlighting Dani Rodrik’s critique of ‘hyperglobalization’. 

Creating the conditions for economic security will require reforms which in the short-term will create uncertainty – uncertainty is the price of reform. The danger is that in prioritising short term stability we lock in place the system that has created so much instability. Stability in that context could lead to another wasted decade.

The big question from the Mais Lecture remains: what speech is the true Reeves? What kind of Chancellor will we get? 

The Radical? Reconnecting business and capitalism with society and the nation? The Iron Chancellor? Sticking to fiscal rules and roadmaps and hoping that business investment will pick up? The Interventionist? Delivering the missions and reforming business and the state to deliver them? The answer to this question will have a significant impact on the future of a Labour Government.