Labour in power faces dire economic inheritance, says Rachel Reeves

<span>Rachel Reeves said Labour’s growth plan was built on three pillars: stability, investment and reform.</span><span>Photograph: Stefan Rousseau/PA</span>
Rachel Reeves said Labour’s growth plan was built on three pillars: stability, investment and reform.Photograph: Stefan Rousseau/PA

The shadow chancellor, Rachel Reeves, has admitted it would take time for a Labour government to turn Britain around, as she accused the Conservatives of vandalising the economy over the past 14 years.

Speaking before next week’s budget, Reeves said the party that wins the next election would have the worst inheritance of any incoming government since the war and that a national mission was needed to kickstart the economy.

“I recognise the dire inheritance we would have if we win the election. I am not going to be able to turn everything round overnight. We are going to have to grow the economy. There will be a relentless focus on what we need to grow the economy,” the shadow chancellor said.

Referring to a soundbite used by George Osborne before the Conservatives came to power in 2010, Reeves said: “George Osborne promised to fix the nation’s roof. But the Conservatives have broken the windows, kicked the door in and now they’re burning the house down.”

Jeremy Hunt is putting the finishing touches to next Wednesday’s budget, with the Treasury massaging down expectations of the size of an anticipated tax giveaway in light of deteriorating forecasts for the public finances from the Office for Budget Responsibility (OBR), which will give its final, confidential pre-budget assessment to the Treasury on Friday.

“I am not going pre-empt what the chancellor does or the forecasts published by the OBR,” Reeves said. “However, we do know that the budget will paint a picture of 14 years of economic failure. The next government – Conservative or Labour – will inherit the worst set of economic circumstances since the second world war.”

Sketching out Labour’s critique of the government’s economic record since 2010, Reeves said public debt as a share of national output was at the highest level since the 1960s; debt interest payments were at the highest level since the second world war; taxes as a share of national output were the highest since 1949; the economy was smaller than when Rishi Sunak became prime minister in October 2022; and the current parliament was on track to be the first in which living standards – as measured by real household disposable incomes – fell.

“There needs to be a national mission to kickstart our economy”, she said. “Instead, we’re having a debate in the Conservative party about headroom and what’s best for Rishi Sunak’s leadership.”

Hunt will use next week’s speech to say the worst is over for the economy and that it is already recovering from the mild recession that it slipped into in the second half of 2023. But the chancellor’s room for manoeuvre is limited by official forecasts showing he will meet one of his fiscal rules – to have national debt falling in five years’ time – by the narrowest of margins.

Reeves has been reluctant to say whether Labour would support any tax cuts Hunt might announce next week, preferring to wait until the OBR publishes its judgment on the the impact of Hunt’s measures after the budget.

She rejected accusations that Labour’s plan for the economy differed little from that of the Conservatives. “People will see a real change in our economy under Labour. People will see something they haven’t seen for a long time: an economy that’s growing and creating prosperity,” she said.

Reeves said Labour’s growth plan was built on three pillars: stability, investment and reform.