Labour's plans are not a quick fix for UK economy

Labour's plans are not a quick fix for the UK economy. The King's Speech aims to address some of the underlying issues in the economy to 'get Britain building'. It will take until next year before we see any significant impact on economic growth from these plans. The primary piece of legislation announced by His Majesty is to promote 'economic stability'. This is noteworthy because stability is usually something that is taken for granted in the UK. The plans outlined include many detailed changes to how the government makes big decisions on planning, infrastructure, housing, and transport. The goal is to give private investors more certainty about the economy and policy. The 'Budget Responsibility Bill' is an elaborate way of ensuring there will never be another disastrous moment like the Liz Truss mini-Budget. No future chancellor will be able to dismiss the judgement of the government's independent financial forecaster, the Office for Budget Responsibility (OBR), as Truss did in late 2022 when she announced £45bn in unfunded tax cuts. The hope is that this will create a rock of credibility and stability, leading to increased investment in the UK and lower borrowing rates for households, businesses, and the government. Internally, they call this 'fixing the foundations'. The OBR's role in judging the affordability of every policy is now firmly established. It also has an immediate role in assessing whether all the other policies announced will actually promote growth. This gives the OBR significant influence over the government's policies. Is this transformative? The government argues that stability itself is almost revolutionary after several years of rolling chaos. But does the chancellor really need legislation to prevent her from doing a Liz Truss? The major consequence of this approach is that the OBR will decide this summer whether all these reforms will boost growth. The OBR has previously given credit to policies that it expects to boost the economy, such as former chancellor Jeremy Hunt's childcare policy. If the OBR does this again for Labour's planned draft laws, it will help improve the trade-offs and reduce the pressure to cut spending or raise taxes. If the OBR does not believe Labour's plans will significantly boost growth, it will be difficult to avoid raising taxes or detailing spending cuts at the forthcoming Autumn Budget and Spending Review. The government is using its large landslide majority to push through some politically painful changes that should boost growth in the long term. It will be a wait to see if it works, and it is currently placing a lot of emphasis on measures that may take a long time to deliver.