Tough choices to end economic stagnation, Crawley Observer Column, Wednesday 30th October 2024

This week Labour is announcing our first Budget in 14 years. While I’m not in a position to confirm or deny its contents, it’s worth taking a moment to consider the context in which this Budget is taking place.

While it has become cliché to refer to the note left by a former Labour Treasury minister that ‘there is no money’, what few people realise is that despite years of Austerity the UK’s debt is now almost three times larger than it was at the end of the last Labour government.

Worse, not only is debt high, but in their attempt to buy their way out of electoral obliteration, the Conservatives left behind a £22bn gap between projected Treasury income and expenditure. Closing this gap means either borrowing more, cutting more, or taxing more.

You can’t just borrow endlessly to fund day-to-day expenditure, not only would it break a Labour manifesto commitment, but as we saw under Liz Trust, if you attempt to borrow billions without a clear plan for how it will ever be repaid you will throw the economy into turmoil.

The Budget is likely to include significant borrowing, but it will be limited to one-off capital spending, investing in national infrastructure which will ultimately cover its own costs through increased economic activity.

Between overflowing prisons, record NHS waiting lists, and local government going bankrupt there’s also not much more to cut from government spending and Austerity demonstrated the risks of cuts dissuading private investment. Which ultimately leaves the Chancellor limited to one option: putting up any taxes which weren’t ruled out in the manifesto.

That’s still a tough choice, but everything the Treasury is doing right now is focused on delivering the economic recovery necessary to ensure household incomes improve in real terms and public services get the investment they desperately need. If the UK’s economy had grown under the Conservatives at the same rate as it did under the last Labour government the average household would be £8,000 better off. That’s why it’s worth taking these tough choices now and bringing an end to economic stagnation.