What Rachel Reeves can learn from Donald Trump

Photo byNext week, Rachel Reeves will publish the Government's Spending Review, outlining the financial settlement for the coming three years. As she makes her final decisions (they always go to the wire) she might consider lessons from an unlikely source: the US President. In recent months, Donald Trump has taken to trashing areas of deep US strength that were taken for granted so completely that they were invisible to most. Trump has done Reeves a favour, by paving paradise and putting up a parking lot. His actions are a reminder of the importance of investing in the unseen infrastructures that enable prosperity.
The British Academy has just published a series of papers exploring what might pull the UK out of its long period of low productivity. The UK has powerful legal, financial, cultural and scientific institutions, but we're not good at organising the economy around our greatest strengths. We have a large population of skilled workers, for example, but they are unevenly spread and mismatched across regions. We do not make the most of our institutional, human and physical capital.
Reeves has an opportunity to invest in these strengths and to make the UK more prosperous over the long term. In the US, the government is currently experimenting with the opposite approach. Trump has taken an axe to America's historic strength in research by attacking universities including Harvard, and cutting or freezing research funding. R&D is one of the drivers of long-term prosperity, and the US will be poorer as a result in the medium term.
By many measures the UK already punches above its weight when it comes to R&D, particularly in universities. Reeves needs to continue investing in this long-term source of growth, and also find a model for the universities where much of this research is conducted to be financially stable. The Government has recently focused on heavy investment in advanced or 'frontier' technology but a significant share of innovation in the UK's services-dominated economy is not especially high-tech. We innovate well through the humanities, social sciences and the arts, in processes and services, as well as we do in cutting-edge technology.
Trump has also reminded us of the dangers of unpredictability. A country whose word cannot be relied upon will suffer economically – even if it is currently the dominant power. The UK faces rather different challenges to the US on the global stage, in that we are not large enough to act unilaterally or bilaterally, nor are we still a member of a major economic bloc. But our deep roots in multilateralism mean we have an opportunity to become the world's most dependable broker. We have an historic role in shaping the major international organisations and we have substantial knowledge of global institutions and international legal norms and practices. In turbulent times this institutional infrastructure is something in which we should invest, with a strategic narrative that the UK economy remains open to the world.
Our relatively stable political landscape, strong institutions and low levels of corruption are not just part of the furniture – they are a source of comparative advantage in an increasingly turbulent world. The openness of our economy is an opportunity to attract and develop human capital. We have a valuable infrastructure of knowledge and finance that is well equipped to support and commercialise innovation.
The UK government has struggled in its first year to find a positive narrative, to move beyond dealing with a difficult economic inheritance. The public knows we have an economy that has suffered long-term stagnation and that we face mounting geopolitical uncertainty. The Spending Review should be couched in a narrative of investing in the UK's comparative strengths and its deep assets, in the infrastructure that is needed to help secure longer-term growth and resilience. If she can do this, the Chancellor might be even able to say that despite the tight economic circumstances, it is the Biggest, the Best, and the most Beautiful spending review ever.
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[See also: Rachel Reeves should fear the bond market vigilantes]
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14 minutes ago

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'It would lead to the birth of extremist moods inside Iran and those who are speaking about [killing Khamenei], they should keep it in mind. They will open the Pandora's box,' he said. On Thursday Israel Katz, Israel's defence minister, said that Khamenei could 'no longer be allowed to exist' and called him the 'modern Hitler'. Iran has 'still got a chance' to do a nuclear deal before the US wades into the war, John Healey, the defence secretary has said, adding the world faced a 'very dangerous moment'. Speaking at the Atomic Weapons Establishment (AWE) in Aldermaston, he said: 'The simple argument to Iran is, you've still got a chance to take a diplomatic route, do a deal, you know you can't develop a nuclear weapons programme. It's unacceptable to the international community and counter to the proliferation interests of us all.' He added: 'We have been absolutely clear, Iran cannot have a nuclear weapon. 'We have been calling for a diplomacy route, we have been backing Trump's calls for a deal with Iran that allows a de-escalation and allows the end of a nuclear weapons programme in Iran and that's the route we are still trying to pursue. Diplomacy first.' Asked if he would allow the US could base its aircraft in Cyprus or Diego Garcia, he said he would not comment on 'hypotheticals' but had been discussing in detail the evolving situation with the US. 'Together we have been calling for Iran to take a diplomatic route and for a deal like president Trump has done and for de-escalation,' he said. The use of tactical nuclear weapons by the US in Iran would be a catastrophic development, Russian state news agency Tass quoted Kremlin spokesman Dmitry Peskov as saying on Friday. Peskov was commenting on what he dubbed speculative media reports about that possibility. On Thursday, the head of Russia's nuclear energy corporation warned an Israeli attack on Iran's Bushehr nuclear power plant could lead to a 'Chernobyl-style catastrophe'. 'If there is a strike on the operational first power unit, it will be a catastrophe comparable to Chernobyl,' the state RIA news agency reported Alexei Likhachev as saying. President Putin said on Thursday Israel had promised Russia that Moscow's workers at the Bushehr site would be safe, even as Israel tries to degrade Iran's nuclear capabilities by force. Israel's military said it struck dozens of targets in Tehran overnight, including what it claimed was a centre for the 'research and development of Iran's nuclear weapons project'. In a statement on Friday, the army said it had 'completed a series of strikes in the heart of Tehran: dozens of targets were struck, including military missile production sites and the SPND (Organisation of Defensive Innovation and Research) headquarters for research and development of Iran's nuclear weapons project.' 9 hours ago 6.33am Israel PM: son's wedding delay is a 'personal cost' Benjamin Netanyahu cited the postponement of his son's wedding as his 'personal cost' of the war with Iran. The Israeli prime minister's comments while speaking in front of the missile-struck Soroka hospital have sparked backlash. Binyamin Netanyahu speaking on Thursday MARC ISRAEL SELLEM/REUTERS He likened Israel's situation to the sustained campaign of aerial bombing attacks by the German Luftwaffe on Britain during the Second World War. 'It really reminds me of the British people during the Blitz. We are going through a blitz,' Netanyahu said. 'There are people who were killed, families who grieved loved ones, I really appreciate that,' he added. 'Each of us bears a personal cost, and my family has not been exempt. This is the second time that my son Avner has cancelled a wedding due to missile threats. It is a personal cost for his fiancée as well, and I must say that my dear wife is a hero, and she bears a personal cost.' 9 hours ago 6.15am Ayatollah is 'the modern Hitler' says Katz Iranian missiles hit a major hospital in southern Israel and struck residential buildings in Tel Aviv on Thursday, wounding 240 people and causing extensive damage. The Israeli defence minister, Israel Katz, blamed Ayatollah Ali Khamenei and likened Iran's supreme leader to 'the modern Hitler'. 'Khamenei openly declares that he wants Israel destroyed — he personally gives the order to fire on hospitals. He considers the destruction of the state of Israel to be a goal,' Katz said. 'Such a man can no longer be allowed to exist.' The top two floors of the Soroka Medical Center are thought to have been empty when the missiles hit AMIR COHEN/REUTERS 9 hours ago 6.00am 'No radiation danger' from Israeli strike on Arak heavy water reactor Iranian state television says there is 'no radiation danger whatsoever' after Israeli strikes on Iran's Arak heavy water reactor. The facility had been evacuated before Israel's latest attack on Iran's sprawling nuclear program. The facility, some 250 kilometres (155 miles) southwest of Tehran, may pose a nuclear proliferation risk because it can produce plutonium, which, like enriched uranium, can be used to make the core of an atom bomb. The heavy water nuclear facility in Arak, central Iran, was hit by Israel as Tehran hit targets including a hospital near Tel Aviv 9 hours ago 5.49am How a US strike on Iran could unfold, step by step If President Trump gives the order, he would have to contend with possible nuclear fallout and retaliation by the Tehran regime • Read in full: How a US strike on Iran could unfold, step by step 10 hours ago 5.44am Iran's foreign minister to meet European diplomats The Iranian foreign minister, Abbas Araghchi, was due to arrive in Geneva on Friday to negotiate with European diplomats, marking the country's first face-to-face talks in the crisis. The British foreign secretary, David Lammy, will head to the Swiss city for talks, his office said on Thursday. Lammy's trip to Switzerland is on the heels of his visit to Washington on Thursday, where he met the US secretary of state, Marco Rubio, and the White House special envoy to the Middle East, Steve Witkoff. 'We are determined that Iran must never have a nuclear weapon … A window now exists within the next two weeks to achieve a diplomatic solution,' Lammy said in a statement. 'Now is the time to put a stop to the grave scenes in the Middle East and prevent a regional escalation that would benefit no one.' The foreign ministers from France and Germany will join Lammy to meet the European Union's top diplomat, Kaja Kallas, at Germany's permanent mission in Geneva before holding a joint meeting with the Iranian foreign minister, a German source previously told Reuters. Iran's foreign minister, Abbas Araghchi IRAN'S MINISTRY OF FOREIGN AFFAIRS/AFP/GETTY IMAGES 10 hours ago 5.42am Australia shuts down Tehran embassy Australia has suspended operations at its embassy in Tehran, citing a deteriorating security situation. The Australian foreign minister, Penny Wong, said Australian defence personnel and aircraft were being deployed to the Middle East as part of contingency plans to help evacuate its citizens and diplomats when the airspace opens. She specified they would not be used for combat. 'We have a very volatile security situation in Iran,' Wong said during a media conference on Friday. 'We do not have to cast our minds back too far in history to understand the risk to foreign officials in Iran in times of unrest.' Consular staff are being sent to neighbouring Azerbaijan to support Australians departing Iran by road, said Wong. 'We are in the process of getting a crisis response team into Azerbaijan, and the purpose is to assist any Australians who get to that border, and that is the border crossing that is the most likely for exit from Tehran,' she added. About 2,000 Australians and their families in Iran have sought assistance to leave the country, official data showed. 10 hours ago 5.33am Sirens sound in Israel after missiles launched from Iran Sirens sounded in southern Israel on Friday morning after missiles were launched from Iran, the Israeli army said. The site of an Iranian missile strike in Be'er Sheva, Israel AMIR COHEN/REUTERS There were reports of a smoke plume rising near a Microsoft facility in Beersheva after the reported Iranian attack. Earlier, the Israeli army warned people in Iran's northern industrial area of Sefidrood to evacuate ahead of strikes. 10 hours ago 5.30am Trump gives Iran 'two-week' reprieve President Trump has stepped back from bombing Iran, giving Tehran up to two weeks to negotiate an end to the conflict with Israel. Trump is looking for an 'off-ramp' after advisers became concerned at Iran's ability to hit United States bases across the Middle East and kill American troops in retaliation for any military intervention, such as the targeting of nuclear facilities with bunker-busting bombs, The Times understands. Trump's spokeswoman, Karoline Leavitt, quoted the president as saying: 'Based on the fact that there's a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go within the next two weeks.' 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