Will Scotland benefit from Chancellor Rachel Reeves' growth drive?

Rachel Reeves’ focus on growth is literally the Chancellor’s mantra. She is reported to have walked into a meeting of Labour MPs earlier this week, clapping her hands and chanting “growth, growth, growth”.

It’s clear why this mission is so important to the UK Government. Pressure on public spending remains high – the Chancellor has very little room for manoeuvre in terms of spending more on stretched public services.

Most of the spare cash available was already spent in her first Budget last year; in future years, financial settlements will be tight unless economic growth boosts tax revenues.

Likewise, for workers to feel better off and living standards to rise, the UK economy has to become more productive – better jobs, not just more jobs. That means increased investment in the infrastructure and technology that gets more economic bang and buck out of every worker and every hour worked.

The problem is that growth and productivity have stagnated for years – the UK never really recovered from the global financial crisis 15 years ago, and the blow from Covid made things even worse.

Keir Starmer has made changing that the top mission of his Labour government. Without it, voters may not give his party another chance in five years’ time.

So Rachel Reeves made a series of announcements on Wednesday aimed at showing the Government is serious about boosting growth.

Most are focused on loosening planning restrictions in England, to build more homes, transport links and infrastructure like reservoirs. Glasgow is one of four regions outside of London that will be prioritised for investment through a new National Wealth Fund set up by the UK Government.

But the biggest impact in Scotland will be felt from the Chancellor’s most controversial announcement: backing a third runway at Heathrow Airport.

Expanding the UK’s only hub airport will lead to thousands of extra flights to Scottish cities like Glasgow, Edinburgh and Aberdeen – potentially Dundee and Inverness too. That will open up international connections for Scots and economic opportunities for Scottish businesses, the argument goes.

Politically, the move is controversial. A lot of Labour MPs – some of whom represent London constituencies under the Heathrow flight path – have voiced their opposition to a third runway in the past. Many of them argue that in a climate crisis, increasing air travel is the wrong decision.

The Chancellor now says growth comes first. But a number of contradictions threaten to undermine her argument. First of all, if economic growth trumps climate change when it comes to airports – what about oil and gas?

Scotland’s offshore energy industry has warned that banning new drilling in the North Sea risks costing tens of thousands of jobs. Forget growth – the threat is of outright economic decline.

The looming closure of the Grangemouth oil refinery, with the loss of 400 jobs, is an early taste of what may be to come. Again, the UK Government says it doesn’t make economic sense to step in and save the refinery. The best hope of a long-term future for the site is redevelopment as a hub for green energy, like the production of zero-carbon aviation fuel.

Reeves announced more support for start-up businesses developing the technology to produce green fuel for airplanes. But so far, government investment in the sector has bypassed Grangemouth – most of it destined for Teeside, in England.

Another contradiction: when one of the biggest problems in the UK economy is the concentration of wealth in southeast England, why is even more investment being funnelled into that same region?

Not just into London airports but into ambitions to turn the corridor between Oxford and Cambridge, with their world-leading universities and high-tech businesses, into a British Silicon Valley.

Voters in Scotland might ask why southeast England gets another Silicon Valley, when Grangemouth gets another Ravenscraig.

More broadly, there are questions about how committed the UK Government is to growth when the biggest short-term blow to the economy has been the rise in employer national insurance, announced at the Chancellor’s first Budget last year.

Businesses large and small have said the increased costs will slash investment, and lead to job losses.

And the final contradiction is the biggest of all. No one disputes the impact that Brexit is having and will continue to have on the British economy. It is on course to be 4% smaller after 15 years outside the EU, still the UK’s biggest trading partner.

But ahead of the fifth anniversary of Brexit this week, Keir Starmer and Rachel Reeves refuse to acknowledge that impact, and have dismissed calls to repair some of the damage to trade by returning to the European customs union.

The UK Government is seeking a “reset” of the relationship with Europe, but it’s likely to be far narrower in scope than plans for a trade deal with the US – especially now that Donald Trump is back in the White House, driving the hardest bargain possible.

Growth, growth, growth is the mantra – but will those contradictions drown it out? And how much benefit will Scotland see? Those questions remain to be answered.