IRA, ARP, IIJA & Chips - Letters from America

Abstract

During her visit to the US in May, Reeves set out her support of Biden and Sullivan's ‘new Washington consensus’ – echoing their focus on creating good, local jobs through the rebuilding of strategic industrial and technological capacity in the domestic economy. For Reeves and Labour, it offers a convenient framework into which their prior commitment to spend £28 billion annually on ‘net zero’ (now by the end of the next parliament) might practically fit. And just like Inflation Reduction Act and CHIPS and Science investment in the US heartlands, it also allows Labour to target parts of the north of England and the Midlands that Labour needs to win back in the next general election.

Pittsburgh is already widely studied in how to turn around the fortunes of a declining industrial city. Central to this has been the role of the city's two main universities: Carnegie Mellon University and the University of Pittsburgh. One specific example of this can be seen at the Mill 19⁹ development in the former steel neighbourhood of Hazlewood Green. Originally built in 1943 to produce arms for the second world war, today it houses Carnegie Mellon's advanced robotics facility and is financed partly by the US defence department and by CHIPS and Science Act investment.

It's perhaps even more surprising given that they still claim to be committed to the levelling-up agenda initiated by former prime minister, Boris Johnson. Indeed, this was also a key element of his Atlantic Charter¹⁶ agreed with Biden: “our commitment to spur economic regeneration and build back better in a way that benefits all communities that have experienced the pain of economic change and advances equality for all – not just in cities, but also small towns and post-industrial areas”.

However, the commitment to spending £28 billion a year on net zero, as well as the pledge to match current government commitments on science investment (£20 billion annually), suggests that there is rather more potential to follow the US model than they might let on. Furthermore, they will also recognise that many elements of ‘Bidenomics’ rest not just on government spending today, but also on tax incentives and credits that get cashed in only as new factories are built and jobs created. This means that it is possible – should they wish – to put together a package of similar place-based investment and incentives that can transform regional and national economic performance, but still do so while meeting fiscal rules and avoiding accusations of high rates of borrowing and spending.