Rachel Reeves’ ‘Securonomics’: A Return to State Dirigisme? OR Rachel Reeves’ Vision: Is ‘Active State’ Just Old-Fashioned Control?
Rachel Reeves’ call for a more interventionist state, outlined in a lecture this week, has ignited debate over the future of the UK economy and its relationship with the European Union. The Chancellor, speaking ahead of her Mais lecture, told Faisal Islam of the BBC she “so believed in an active and strategic state… working with working people to shape the economy not just to let the market determine our future.” This philosophy, dubbed ‘securonomics’, echoes earlier government initiatives and signals a potential shift towards greater state control, a concept critics are labeling as a return to “dirigisme.”
Reeves’ vision centers on directing investment into key sectors and fostering closer alignment with the EU, a move she argues is crucial for economic resilience. She cited “independent studies” suggesting Brexit has cost the British economy 8 percent of its GDP since 2016, advocating for regulatory alignment with the EU as the norm, with divergence being the exception. However, this approach clashes with post-Brexit ambitions of regulatory freedom and has drawn criticism from those who believe the UK economy is already benefiting from its newfound autonomy.
Recent economic indicators paint a challenging picture, with growth forecast to be barely one percent this year, business investment flatlining, and unemployment at 5.2 percent – the highest level since 2020. This economic context, Reeves argues, necessitates a more proactive state role. Yet, analysis from Ross Clark in The Spectator suggests that Britain’s economic growth has, in fact, outpaced Germany’s in the years following Brexit, while mirroring France’s performance.
The Chancellor’s proposals extend to artificial intelligence, with plans for a Sovereign AI unit and state-backed compute capacity. However, experts question the efficacy of government intervention in the tech sector, pointing to the success of companies like DeepMind, Wayve, and Arm – all products of research universities, capital markets, and entrepreneurial spirit, rather than state backing. Reeves’ proposed AI Economic Institute and sovereign funds, critics argue, risk becoming mere scaffolding for innovation that can only truly flourish in the private sector.
Similarly, her regional growth agenda, featuring Development Corporations and compulsory land acquisitions, draws parallels to the Regional Development Agencies of the early 2000s, which spent over £15 billion over a decade with limited success before being abolished.
Reeves’ speech also touched on potential solutions to the current economic stagnation, including radical planning system reform and a reversal of the rise in employers National Insurance. The latter, she acknowledged, has contributed to a weakening labor market, with the British Chambers of Commerce, Goldman Sachs, and the House of Commons Library all attesting to a freeze in job hirings and a rise in unemployment, including a youth unemployment rate exceeding 16 percent.
The core of Reeves’ strategy, as described by economist Emmanuel Igwe, represents a rebranding of traditional dirigisme – a belief in the state as the central planner and guarantor of national prosperity. This approach, Igwe contends, misdiagnoses Britain’s growth problem as a lack of intervention, when in reality, it is an excess of it. The long-term implications of this shift remain unclear, particularly regarding the UK’s future relationship with the EU, as the bloc has consistently maintained that market access requires adherence to its rules on fiscal contributions, social directives, and free movement. The question remains whether Reeves’ “convergence by a thousand cuts” will ultimately lead to a return to the level of control by foreign powers that voters rejected in 2016.