Yahoo News Our economy isn’t safe with Labour. Don’t trust Keir Starmer’s promises
As a Labour government in waiting conducts the most intellectually dishonest election campaign since the Lib Dems in 2010, it is becoming progressively trickier to get at the truth through all the triangulating gibberish. Still, over the past couple of days, an inconvenient revelation about Keir Starmer has threatened to surface. Namely that, as Britain grapples with economic stagnation, the prime minister-in-waiting is without a plan for growth.
Starmer is trying his hardest to distract from this. In a major speech outlining Labour’s vision for the economy at the Resolution Foundation, the leader of the Opposition insisted that a Labour government’s “defining purpose” will be “raising Britain’s productivity growth”. He pressed on that this would be achieved through a paradigm shift from laissez-faire to “securonomics”, with the state playing a more interventionist role in shaping markets.
Such utterings – copied and pasted from the handbook of American Democrats – were not those of a leader with laser-focused vision but rather one with eyes averted from the cruelty of the dawning light. The fact is that Bidenomics, the grand growth policy that inspired Labour’s “securonomics” and on which the global centre-Left has bet the farm – is a dud.
In Washington, the federal government has learnt the hard way that channelling massive investment into towns with degraded infrastructure and local political cultures debased by decades of nasty battles for control over limited resources is a recipe for waste and cronyism. Biden’s slew of “green” investment vanity projects have failed to translate into higher living standards for ordinary people struggling to make ends meet as grocery, housing and healthcare costs rise.
In the White House, the penny has dropped that building a strong “entrepreneurial state” will demand a vast amount of money, time and political wiggle room for major errors. Securonomics was supposed to signal the biggest paradigm shift in the West since the rise of Thatcher-Reaganism in the 1980s. Its thrusting sense of history, and neat oppositional symmetry – repudiating laissez-faire in favour of targeted, localised infrastructure investments – has proved irresistible to social democrats across the world. In reality, it has already crashed and burned.
Such a revelation is a disaster not only for Joe Biden but for Starmer, who is set to inherit severely compressed fiscal headroom as the Tories embark on a last-ditch series of tax cuts before the next election. His decision not to use his speech yesterday to champion the £28 billion “green New Deal” he not long ago vowed would transform the British economy is final confirmation that the policy is now being discreetly binned.
This has left Labour scrabbling around for an alternative flagship growth policy. The “free” paths to growth favoured by the Treasury – softening Brexit and relaxing labour immigration controls – are too politically toxic, risking the ire of the Red Wall.
A truly bold approach to planning reform is an obvious back-up. Indeed, in his speech Starmer vaguely gestured that “getting Britain building again” is one of his three key steps to trigger growth. But Labour has expended so much time and intellectual energy on a green plan that they may struggle to conjure a compelling vision and wargame in the time they have left. The obstacles to a housing-driven economic revival are formidable, from uncooperative councils to Labour’s likely victory in 2024 in several Nimby swing seats.
This leaves Starmer in a perilous position. Until now, the Labour Party has triangulated furiously between vowing to administer a shot in the arm to the economy through a green New Deal, to maintain iron fiscal discipline, and to protect the welfare state. The belief was that Bidenomics would raise the tax coffers enough to fund public spending while still balancing the books. But with the crucial growth pillar of its economic policy having collapsed, what Labour is offering is merely a toxic dualism of fiscal prudence and welfare protection – a ruinous contradiction that can only culminate in the betrayal of austerity or the calamity of higher taxes.
The only question is which of these two treacherous paths Starmer will pursue. For all Rachel Reeves’s reassurances that Labour has “no plans” to increase income tax nor introduce wealth taxes, her party will soon discover that, in a stagnant economy, it is not possible to maintain public services – let alone make good on promises to unions over “fair pay” –without raising taxes to yet another historic high. This would inescapably involve raising taxes for “ordinary working people”.
By optimistic estimates, a wealth tax would generate less than half the amount needed each year to meet projected costs to maintain the welfare state and service the country’s debts. Even if Labour simultaneously hiked the top rate of tax to 50 per cent, that would still leave the state billions short. This is not a circle squeezing “the rich” can square.
The other unenviable option open to Prime Minister Starmer would be to slash government spending. As the shadow health secretary Wes Streeting’s recent Australia visit attests, the party seems open to challenging the NHS’s “untouchable” status and pursuing efficiency drives. But for all the tweaking, Labour still balks at the hybrid privatisation that would significantly reduce NHS costs (and is a key feature of the Australian model).
Given Labour remains in hock to the unions, a public sector pay freeze is unthinkable. The obvious alternative would be to slash out-of-work benefits. The spectacle of Labour abandoning the country’s most vulnerable in order to shore up the lifestyles of middle-class civil servants, teachers and train drivers would risk a moral and reputational disaster for the party even more spectacular than the Iraq war. On the other hand, Starmer may choose to gamble: as David Cameron discovered, welfare-slashing populism in Red Wall towns can be a vote winner.
Whichever option Labour goes with, what is clear is that the party is on course to commit the biggest voter betrayal since the Lib Dems on tuition fees. Whether it’s historic tax rises or a historic repudiation of Labour values that is on the horizon, the fallout will be far-reaching.
