Labour to favour visible state intervention over ‘invisible hand of the market’

The Business Secretary will pave the way for greater economic regulation by arguing the “invisible hand of the market” cannot deliver growth.

Jonathan Reynolds will use his first major speech in office to lay the groundwork for a more interventionist approach, based on red tape and higher subsidies.

Addressing fellow trade ministers from the G7 nations on Tuesday, he will also set out plans to pursue a “closer, more mature” relationship with the European Union.

His remarks come after Rachel Reeves, the Chancellor, said she would mirror the economic policies of Joe Biden with her own brand of “securonomics”.

The US president has overseen a huge programme of public spending, mostly on subsidies for green energy, to promote domestic manufacturing.

He has also introduced $1.4 trillion (£1.1 trillion) of extra red tape, according to the American Action Forum, earning him the moniker of “regulator-in-chief”.

Global challenges

Mr Reynolds will argue the actions of states like Russia and China, which are “distorting free, fair trade” mean the UK must take a similar approach.

“We are not naive about the scale of the challenges threatening global stability,” he will tell the G7 summit in Southern Italy.

“It’s why our Chancellor is pursuing a clear-eyed strategy of ‘securonomics’ – prioritising economic strength and resilience to increase market confidence and spur growth.

“Governments cannot rely on the invisible hand of the market to do this for them.

“Fair, open markets with healthy competition can only be achieved through purposeful interaction between governments, business and institutions like the G7.”

Free markets

The phrase “invisible hand of the market” was coined by Adam Smith, the free market economist, in his 1776 work The Wealth of Nations.

It refers to the principle that businesses and people, acting self-interestedly, will often deliver the best economic outcomes and allocation of resources.

Smith used the concept to argue that governments did not need to intervene to force international traders to invest in their own home country.

Mr Reynolds will also use the meeting in Italy to press Labour’s case for a closer trading deal with the EU, which the party says will help boost growth.

He is set to hold his first meetings with Valdis Dombrovskis, the EU Commission vice-president, and Robert Habeck, the German vice-chancellor.

‘A level-headed relationship’

“In the UK, we now have a strong government with an even stronger mandate from the British people,” the Business Secretary will say.

“My message to you today is simple – Britain is back. A confident, outward-looking, future-facing UK is ready and willing to play our part on the international stage.

“We are seeking a closer, more mature, more level-headed relationship with our friends in the European Union – our nearest and largest trading partner – and we also intend to forge better trading relationships with countries around the world.”

Sir Keir Starmer has ruled out Britain rejoining the EU’s Single Market and Customs Union, or accepting the return of free movement of people.

But the Prime Minister has said he wants to strike a new deal on agricultural exports, which could require Britain to effectively copy and paste EU rules on food safety.

He is also hoping to seal a pact on professional qualifications that would make it easier for British people to work in Europe and vice-versa.