 We're gonna get quickly on because we don't have a huge amount of time with the Shadow Chancellor and you can imagine, given the kind of target rich environment that the last few days and even this morning has provided for a Shadow Chancellor we're gonna have a rather one-sided conversation initially she's gonna give him 5 on 10 minutes of remarks and then we will have a conversation and if I grab this iPad I will also be trying to look at the questions as well, but Rachel Reeves shall answer, would you like to kick off? Thank you very much Stephanie, I want to take this opportunity to pay tribute to the work of the economy 2030 inquiry. Today's report I think strikes at the truth that our economic problems are deep rooted, but that they are far more than abstract questions of lines on a chart, and it is questions of growth of productivity and inequality which underlie the sense that Britain isn't working for far too many people today. Now as many of you will know I'm an economist by trade spending the best part of a decade at the Bank of England, but I'm also a politician so I want to spend the first few moments on the political situation that we find ourselves in, because the tables have turned. On the day that the Prime Minister finally announced his intention to stand down last week, I was in Leeds meeting with business leaders, and what I heard from them was the same as what I've heard repeatedly over recent weeks, that political instability at the top is a major drag now on market confidence, and the last week has shown us something else about this government, because any lingering sense that the Conservatives are the party of economic responsibility has been shredded to pieces over the last few days. Instead of setting out serious plans to help people with the cost of living crisis, just as we hear terrifying estimates of what is going to happen to energy bills come October, we are presented with an extraordinary spectacle of a Tory tombola of tax cuts, with no explanation of what public services will be cut or how they would be paid for. Honesty and integrity really matters in politics, not just when it comes to parties and rule breaking, but also when it comes to economic policy making. The level of unfunded tax cuts being bandied around this week will blow a massive hole in the public finances. Every single Conservative leadership candidate supported the government's fiscal rules when they were passed into law only in January, but now they are prepared to take a flamethrower to them. Now I set out the fiscal rules that would bind the next Labour government, rules that I will stick to with ironclad discipline, because responsible management of our public finances is the only route to providing the strong foundations that we need, to reboot our economy, revitalise our public services and re-energise our communities. They will be paired with an absolute commitment to ending the shocking levels of waste and fraud that we have seen under this government, strengthened by the creation of a new office of value for money, to make sure that every pound of taxpayers' money is spent with the respect that it deserves. Now back in September I said that I was more than happy to take on the Tories when it came to economic competence, because I know that we can win. I didn't know at that point that they weren't even going to bother putting up a fight. Now it is important that we put this moment into the wider context as well, because we face a succession of longer term challenges of low growth, flatlining productivity, stagnant wages and now soaring inflation. Under the last Labour government the UK economy grew by an average of 2.1% a year. It enabled us to deliver the biggest boost in investment in public services that any of us have seen in our lifetimes. But since then growth has averaged just 1.5% a year. Now we shouldn't kid ourselves that this is solely a product of long term global trends. The UK had the second lowest productivity in the G7 in the 2010s. And as today's report shows, the UK's productivity gap with France and Germany has almost trebled since 2008, equivalent to an extra £3,700 in lost output per person. The stagnation isn't inevitable. Our capacity for innovation, enterprise and old fashioned hard work remains undiminished. Britain has huge opportunities if only we had a government that can bring the country together in a spirit of national purpose. But the only alternative to a high tax, low growth, high inflation economy is a serious plan. Let me tell you what that involves. It means addressing our deep rooted supply side problems which have contributed to low growth and stalling productivity and are also a major factor in the spiralling levels of inflation that we're seeing now. In America Treasury Secretary Janet Yellen has called this approach modern supply side economics. It's based on the knowledge that government plays a crucial role in bringing about economic growth and tackling the structural challenges that have held us back. My vision for a modern supply side economics in the UK involves three key things. First, we need to make sure that people can realise their potential and play an active role in a growing economy. For all ministers talk of a jobs miracle, the reality is that we have a hidden worklessness crisis with employment lower than before the pandemic at a time of record vacancies and a million people missing from the workforce relative to pre-pandemic trends. That is why my colleague Jonathan Ashworth this week outlined plans from better links between employment and health services to flexible working and reforming how our job centres operate to help people return to work where they can and fundamental to strengthening our supply of labour is supporting parents and especially mums to work. That means urgently addressing the cost and availability of high quality affordable and flexible childcare. Second, we need to support British businesses to thrive. Working in partnership to get the economy growing again and provide the good jobs we need. That will rest on a modern industrial strategy. On our plan to use all tools of governments at government's disposal to buy, make and sell more here in Britain and on our climate investment pledge which will help create new markets and leverage in private investment and drive carbon emissions down. Today's report argues forcefully and rightly that we must play to Britain's strengths. We are the second largest exporter of services in the world and pioneers in creative industries. We should be really proud of those strengths. That is why it was beyond belief that the Tories delivered a Brexit deal that hurts our creative and service industries. So we will address these flaws. Building on the deal, ensuring at a minimum we agree the mutual recognition of professional qualifications and negotiate an EU-wide cultural touring arrangement for British creatives. And third, we need to support great British entrepreneurs. Which is why last month I announced the launch of a new review for the Labour Party led by a panel including Lord Jim O'Neill to map out how we can build the institutional ecosystem that ensures that new and growing businesses have what they need to flourish here in the UK. This approach, a new modern supply-side economics, comprises an ambitious plan for growth grounded in the realities of the world in the 2020s, not in Tory party fantasy which would result in higher borrowing, increased mortgage rates and cuts to our schools, hospitals and police. Labour's alternative is based on partnership, partnership between government and business working for sustainable growth, felt in every part of our country with a serious plan and a determination to deliver it, built on the strong foundations provided by our fiscal rules committed to honesty and integrity because they are important virtues in public life and because they are essential to a confident growing economy with stronger public services and higher living standards for all. Thank you. Well thank you very much for that and you talked about a lot of the long-term challenges and that's been the focus of this conference but obviously in government you have to balance what you're doing to tilt the economy in a better long-term direction with not making things worse in the short term. So can I just start by asking you what seems to be quite a sort of basic question that any certainly any centre left party needs to answer in the environment that we find ourselves which is what's the higher priority for you? Taming inflation which hurts households, poorer households the worst or restoring public services and giving teachers and doctors and others a decent pay rise. What do you think has to come first? Right now we've obviously got to address the cost of living crisis which is why since the start of the year I've been arguing for a windfall tax to put money in the pockets of people who are struggling with those higher bills and that is the immediate priority because people can't wait for that help with their energy bills with the rising food prices, with the rising price of petrol to fill up their car but then everything else really whether it is better wages for public sector workers more investments in our public services or improving people's living standards it all comes down to economic growth and that's why I focused in the main bulk of my speech today on that plan what I call modern supply side economics to get our economy growing again because the reason why the Troys have become a high tax party despite all of their promises in the last few days the reason they've become a high tax party is because they've become a party of low growth and when you have low growth it means you don't have the money to invest in public services you always have to raise taxes anytime you want to do anything because you're not getting those proceeds of growth and so ultimately everything you want to do whether it is improving our public services, improving living standards or lifting all parts of the country to share in prosperity has got to come through a plan for growth and growth is really important but right now what would be a reasonable pay rise for teachers and indeed ordinary workers across the country? What do you think would be a sensible, would be a responsible course for you as Chancellor to support? The pay review bodies at the moment are in negotiations and it wouldn't be right whether you're in government or in opposition to cut across that process and I don't intend to do so but the truth is you're not going to be able to improve public services including the wages being paid to public servants who certainly deserve a pay rise you're not going to be able to get any of those things on a sustainable basis unless you are growing the economy and that is the truth of it which is why my focus is on how we can get growth and productivity off the floor so we can then bring in the tax revenues to invest in the public services that you speak about I'm coming back to this because I do think and as you said the start reminded us that you're an economist and it's quite important to sort of work out what we think about this inflation I mean that the higher cost of imported food and energy has made us poorer as a nation it's a hit to all of our standard of living, a permanent hit and all you can hope to do is at the margin affect the short term distribution of that hit and certainly potentially affect the timing of that hit because you can kick the kind down the road if you like with matching wage increases but at the cost potentially of setting off another round of inflation so I'm just trying to give, do you accept that there's been a permanent hit to our living standards whatever we've managed to do about growth in the next five or six years with an amazing new plan and what's the responsible way to respond to that? Well I'd say two things to that first of all you're absolutely right that this is the hit to our living standards and you've got to decide as a government how to respond I think that more should be done to help those at the lower end of the income distribution which is why when I set out Labour's plans for a windfall tax we used the vast bulk of that money to put money into the warm homes discount and expand the number of people getting the warm homes discount because that would ensure that people who mostly the money are getting it Who gets the most money under this government scheme? People who own two or three homes You get £400 for a first home, £400 for a second and someone and so forth I think the Chancellor has got sort of like eight homes so he's doing very well out of this deal but if you are on a low income then you don't get anything like that so this is a badly targeted scheme and so you're absolutely right that this has a hit and it's up to then governments how they respond and ensure under my plans that it would be the lower income people who are struggling most with the rising cost of living would get the most help so I think that's what you best can do distributionally Sorry, I mean the Bank of England I mean I take all that point but the Bank of England would say that anything over sort of, you know the Governor of the Bank of England has specifically said he's certainly nervous about wage growth that's going beyond 5% across the economy because anything above say 3.5% would clearly be inflationary and I was wondering do you think he's right in making that assessment? Let's look at where the wage growth is happening so wage growth in the top 1% is 20 times higher than wage growth for the bottom 10% and 4 or 5 times higher than for those in the middle and wage growth in the private sector is running at something like 4 or 5 times higher than wage growth in the public sector so I don't think the Bank of England have suggested this but I think the Government would quite like to suggest this that somehow ordinary working people and particularly those in the public sector are somehow responsible for this inflation shock and sustained levels of high inflation is just a fallacy and the people who are getting the biggest pay rise are those at the top of the income distribution who are least affected by the rise of inflation so if restraint is needed anywhere is this restraint at the top? You talked a little bit at the start about the bidding war on the tax cuts and this amazing opportunity to define Labour as the party of fiscal discipline and economic prudence if you do what you're talking about for giving more household support against the cost of living crisis I'm just wondering the tax cuts that the candidates for the Tory leadership are proposing depending on who you talk to add 20 to 40 billion a year to borrowing would you imagine I imagine that's not going to be your highest priority income tax cuts but would you be expecting to borrow that much more as a result of your extra spending how are you thinking about that trade off? I set up a set of fiscal rules that I outlined at Labour Party conference last year I think it's the earliest that any shadow Chancellor has set out a set of fiscal rules but I think it's really important to do that the truth is that the last election one of the big reasons for people abandoning Labour is they just didn't believe that our sums added up but frankly in many cases they didn't and so I wanted to set out a set of fiscal rules and those fiscal rules are first of all that all day to day spending would be financed by day to day tax receipts that second we would get our debt falling as a share of the national economy because debt is getting close to 100% of GDP and then subject to that we would invest in things to enhance our long run productivity and growth potential and that's why I set out also at party conference Labour's climate investment pledge of £28 billion a year to invest in those industries and jobs of the future but you can only do that if you get the day to day spending under control and the climate investment pledge is really important to me because it is part of how we seize those opportunities and we are meeting our obligations our moral obligations to tackle climate change but you'll only be able to do those if you control the day to day spending and that is essential to me because that is about the lifting growth which enables us to do all the other things that Labour governments want to do as well I just don't believe that these tax prices tax cuts are justifiable or will have the impact that we need them to have which is to boost growth I don't think it is the right priority and I think it is incumbent on the leadership candidates to say how they will be funded will they be funded by cuts as Nadine Zahawi has suggested to police and schools and hospitals or will they be funded by more government borrowing which will push up debt interest payments and make it harder to invest in those things that will actually boost our growth and productivity on the party of fiscal discipline you actually will have to be more disciplined than the Conservatives which means when you spend more money on supporting households you are going to have to pay for it otherwise you are just in the same boat so how would you pay for that extra cost of living support so for example we set out the windfall tax at the beginning of the year and explained how we would use that to expand the warm homes discount for example and we put two amendments to the windfall tax legislation on Monday but one was that there wouldn't be investment allowances to help North Sea oil and gas companies invest more in the extraction of fossil fuels which means a third of the money that is coming in through the windfall tax goes straight back out to the same companies so one and a half or two billion pounds wasted in those investment allowances and we wouldn't be giving money to people with second and third homes that's another 200 million pounds of government money wasted it's about priorities I support the windfall tax I was the first person to propose a windfall tax but I would be using all the money from that windfall tax to actually help people with the cost of living crisis it's also definitely why I've said that we would charge VAT on private school fees and we would use that money to help catch up in our state schools it's why we've said that bonuses paid to private equity bosses should be treated as income and not capital gains to improve mental health services and it's why we have said and this is a tax policy that no Tory has endorsed yet that we should get rid of the non-dom tax status because it is not right that some of the wealthiest people who make their home here in Britain are not paying their fair share of tax so it's about tax fairness how can we ensure our tax system is fairer and how can we also ensure that our tax system incentivises growth and I do not believe that the Tory proposals are going to do either of those things we've had a lot today about the problem of UK relative productivity and indeed the sort of relative stagnation that we've had in terms of economic growth and you talked a bit about it in your speech there hasn't been a lot of support here for an emphasis on tax cuts and tax as the lesson as the recipe for transforming British productivity philosophically how is your diagnosis different from the Conservatives that they notice in your long term growth strategy wow this is a different kind of government well I've tried to set out there three things that I think are essential for boosting the long term productivity and growth through a focus on the supply side modern supply side economics so the first is around boosting labour supply and that is a combination of helping people who have exited the labour market and we've got something like a million more people on sickness benefits than before the pandemic thinking up employment and health support but also improving access to childcare to ensure that more parents but particularly mothers can work and not just in any job but in jobs that are commensurate with their skills not just ones that are commensurate with their caring responsibilities so first on the labour market side a modern supply side approach second a modern supply side approach that works in partnership with business to ensure that we're seizing the opportunities out there whether that is in the data industries whether it is in life sciences or in some of those low carbon industries having government partner up with business to ensure that we are making the most of our potential and I see the tackling climate change as being important for three reasons first of all we do have that moral responsibility to our children and grandchildren second as the OBR's report just last week shows the costs of inaction on climate change are much greater than the costs of action so as a physically responsible Chancellor I would be taking those actions now but also because I see this as a massive opportunity to ensure that there are good quality job paying decent wages in all parts of the country whether that is in producing new electric cars with the investment in gigafactories and supply chains a hydrogen industry carbon capture and storage, tidal energy you know in all of these areas we could be global leaders we could be heritage because of our geography because of our great universities and innovation but other countries are now stealing a march on us and the risk is that we'll end up importing all these things because we didn't take the opportunity now to grow those industries when we had a chance Martin Wolf had an interesting comment I don't know if you're still here but he had an interesting comment in the earlier session that one of the things that our most successful sectors and services have in common is they don't involve cross class cooperation and that Germany benefits from not having the same kind of class tension in class conflict, do you agree with that? I think I wasn't here to hear what Martin said but I thought I don't know if John... I wasn't here to hear the context of what he said but I was doing something interesting that John van Rienen was saying about the problems of inequality I don't know if John has spoken today but he says that inequality is one of the things that holds our country back it's a sort of similar point that made in a different way and it holds our country back because we miss out on he calls them the lost Ironsigns and the lost Maric Hewries because innovation rates amongst lower income people are lower because then there's access to the same opportunities so actually I think high levels of inequality which is something that sadly scars I think our society as well as our economy is holding back our economic potential so we do need to find ways to ensure that everybody has access to those opportunities and I think also one of the reasons why particularly during the austerity years that growth has been poor is that money was taken out of the purses and wallets of people who actually spent their income and so I think there is a big an important link and I think under understood not well understood perhaps by policy makers maybe they don't want to understand it about the links between inequality and growth I think both on the supply side in terms of the John Van Reenam point but also on the demand side by sucking demand out of the economy when the economy was already weak at two of the reasons why our growth is lower than for example the Germany's of the world I'm going to take you back to just sort of the more immediate challenges we're going to run out of time in a second but you mentioned the sort of longer term or medium term plan for combating climate change and getting to net zero obviously the war in Ukraine soaring gas prices have really messed with the short term bit of that strategy of the net zero strategy for any country and markets are starting to think now about the implications of a total cut off by Russia of European gas pipelines and we uniquely vulnerable to that because in the winter we import a lot of gas and we've got tiny amount of storage capacity as we're all learning about so just if you were in government the next few months how would you respond to that differently than the Tories you've already mentioned that you're not going to be giving extra incentives to the North Sea gas but how would you respond to that problem the fact that we could have another massive hit to gas prices well first of all more extraction in the North Sea and giving permission for Canberra is not going to make an impact anytime soon on access to greater supplies of oil and gas so I think that is a total misnomer one practical thing that we can be doing right now to reduce our need for imported gas is to get on with insulating homes and I set out last year how we could be insulating two million homes a year and if all homes were brought up to EPC performance level C it would reduce our imports of gas by 15% that is something practical that government could do because these problems are going in the next three months though if this happens it could happen in the next few weeks well I suggested this last year they could have insulated two million homes before this winter if they had got on with this but the problem is is government keep delaying some of these really important things that are necessary to bring down our carbon emissions and I think the big lesson of the oil and gas crisis and the spike in prices is that we have got to do more to invest in our own homegrown renewables sector including the storage of electricity because without that we are going to be and continue to be over reliant on the import of oil and gas from countries that do not share our values and we are beholden to them so this should be a wake up call not for more oil and gas because I don't think that more extraction in the North Sea is the answer to the challenges we face but instead a real focus in investment in homegrown renewables to reduce our carbon emissions to reduce the price of electricity and also crucially to boost our energy security the public has been very supportive to date of Ukraine and our very muscular support of Ukraine if the polls started to suggest that with another round of massive energy price rises that the public was actually starting to blame the war for these soaring prices and was actually starting to sort of wane in its support for Ukraine. Would that affect in any way what you thought was the right thing to do for the British government? I think that the biggest risk is if Vladimir Putin thinks that his behaviour and his aggression in Ukraine and elsewhere goes unchecked what happened unfortunately after his invasion in Crimea we can't let it happen again because he won't stop at Ukraine we all know that I don't think that the support of the British people will wane I think the support given not just by politicians but even more so by the whole country for Ukraine has been an amazing outpouring but ultimately when it comes to the sort of defence and security realities the most important thing is Vladimir Putin knows that he can't get away with this because that will put us in greater danger in the future. We do seem to have ended up with Vladimir Putin instead of long term growth but anyway maybe that's the fact that we can at least continue in our strategy on Ukraine is a voice of optimism when so little else has been optimistic in this conference. Thank you very much Rachel Reeves and thanks everyone.