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24 November 2023

Does Labour have the courage to reverse Britain’s decline?

To avert political and economic failure, a Starmer government may have to act more radically.

By Lewis Goodall

At the start of this long procession of Conservative governments, it was often said that David Cameron was “an essay crisis” prime minister. Fair or not, the essay question for him, and his successors, has not changed since he first arrived in office. How to reverse British economic decline? How to generate rising living standards, without which, year after year, the British state and its citizens have been gradually immiserated?

Neither Cameron, nor his successors, found an answer. Indeed, many of the Tories’ paroxysms since have come from the failure to find one. It’s easy to forget now, since it has only deepened our economic woes, but Brexit itself was posited as an answer to national malaise. Jeremy Hunt knows he doesn’t have time to implement his own iteration, even if he had one – though some of his policies on business investment and expensing are credible and serious. But on much else, he proved an unlikely conjuror on Wednesday (22 November), pulling off profound sleights of hand in his Autumn Statement – perhaps the biggest being that anything has improved since he told us, only six months ago, that tax cuts were impossible.

The Conservative press has done its best to tell a different story – that a corner has been turned. Yesterday’s Times front page, informing its readers that Hunt has “eased the tax burden” was especially egregious. It’s a reminder that for all the invocations of the 1997 general election, one key dynamic differs: the press remain better-disposed to Rishi Sunak than they did to John Major and generally more hostile to Keir Starmer than they were to Tony Blair.

But the past 48 hours have been a good demonstration of how Westminster often creates its own reality; of how not only the press but much of our politics make daily trades in illusion. Conjuror Hunt made the “tax burden” more modest but this remains the biggest tax-raising parliament in modern history (with taxes set to rise by 4.5 per cent of GDP compared to 2019). Cuts to National Insurance are more than offset by dramatic tax rises in the form of “fiscal drag” – not raising tax thresholds in line with inflation. Four million more people will pay income tax and three million more will pay the 40p tax rate. The Treasury has made a speciality in recent years of robbing Peter to pay Paul, only to rob Paul shortly afterwards.

There were other phantoms too. Hunt’s supposed “headroom” of £13bn is predicated on real-terms cuts of £19.1bn to departmental budgets and a rise in fuel duty that no one expects to happen. Unprotected departments would see real per-person spending cut by 14 per cent, an austerity programme that would be more painful than George Osborne’s because there is no obvious fat to cut after the last decade.

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For the Conservatives, this is a twin victory. If they win the election it will partly be as a result of forcing Labour to contest the politics of scarcity, on which it is unsteady. If the Tories lose, they will have bound the hands of an incoming Labour government even more tightly – a final flourish of Osbornism. 

The contours for the next election are becoming clearer by the day. Sunak’s speech on the economy on Monday (20 November) and Hunt’s statement reveal a Cameron-era restoration not only in personnel but in policy. Both men have spoken of the need to shrink the state, to trim welfare, to stop the government “picking winners”. So much for Red Wall-focused industrial strategy and “levelling up”. The Conservatives are retreating to their 2015 incarnation. The next election will be fought on traditional Tory turf, both figuratively and literally, in true blue seats and on tax-and-spend. Sunak and Hunt will focus relentlessly on Labour’s promise of £28bn of capital spending to fund the green transition. In the heady days of 2019, fresh from Boris Johnson’s victory when it looked like the Conservatives had glimpsed a new vision of political economy, this would have seemed an unlikely outcome. It is nonetheless where we are.

Labour will have to think deeply about what this means for any governing project. Ahead of a general election that will likely yield a social democratic government, Europe appears to be flirting with darker forces. Geert Wilders’ far-right Party for Freedom was returned as the largest party in the Dutch election. In Germany, the governing Social Democrats trail the hard-right Alternative for Germany. Marine Le Pen continues to gather force. Giorgia Meloni is the centre of Italian politics. European populations are continuing to punish the forces of moderation for not having an answer to years of misery.

The same pattern could repeat in Britain should Labour fail to arrest the UK’s decline. In opposition, the Conservatives could be further radicalised as speculation grows over whether Nigel Farage would be admitted to the party.

To avert political and economic failure, a Starmer government may have to act more radically than it has publicly been prepared to countenance. It needs not only to restore economic growth and its connection with wages, but to generate enough revenue to rescue Britain’s public services. Wealth taxes may have to be considered. A deeper EU trade deal will become essential. The party’s current offering is a reasonable start but won’t deliver what’s needed.

This was an Autumn Statement built on stilts and defined by fiscal illusions. I wonder whether our politics can afford many more of them.

Read more:

Marx and Keynes can free Labour from its budget bind

The Tories’ secret workforce: record immigration

How should Labour respond to the Autumn Statement?

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