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5 December 2023

Keir Starmer’s economy speech offered more questions than answers

Labour’s fiscal policy remains contradictory and opaque.

By Freddie Hayward

Keir Starmer did not announce anything new in his speech on the economy at the Resolution Foundation yesterday (4 December). But the details of Labour’s proposition have become more pronounced. The fundamentals have not changed. But it is worth reciting what they are.

Labour’s fiscal rules dominate its plans for government. Their precise nature remain ambiguous. The £28bn green prosperity fund is still official policy but is mentioned with reluctance, as if it were the brainchild of a vexing coalition partner. Labour’s big fiscal bet remains that cheap, supply-side reforms (such as liberalising planning for houses and infrastructure) will unleash growth, which in turn will provide the revenues that the state can invest – not the other way around. Starmer says growth would be his government’s “obsession”, the mission that shapes every decision.

This programme is constrained by a fear that the markets will punish any deviation from fiscal orthodoxy, one that seems more anxious to cast the Liz Truss era, and not the past 13 years, as the enemy. When asked what the difference was between his programme and some of the supply-side reforms Jeremy Hunt has announced, Starmer said the Tories lacked the credibility to deliver them – which is not exactly a resounding sign that there is much difference between the two parties.

[See also: James Cleverly’s immigration plans are unconservative]

But he went on. Labour embraces an “industrial strategy” in a way the Tories do not, he said. Think of the national wealth fund and Great British Energy. Starmer spoke with ease about the government picking which companies will receive state support, and which therefore will have to face the full force of the market. This age of insecurity requires a new “economic consensus”. In the same way that the shadow foreign secretary David Lammy is keen to link foreign and domestic policy, economic security is now national security.

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All of which constitutes an uncomfortable balancing act that Labour hopes will take it over the finish line. The picture Starmer paints is bleak. He said Britain’s “decline” was inflicting a “cultural trauma” on the country, which was a “well from which so many political horrors can spring”. Starmer is trying to balance his parlous financial inheritance with an argument that things will be different under Labour, recognising people’s despair while inspiring hope.

He did not provide answers when asked whether Labour would implement spending cuts pencilled in for after the general election. Nor is it clear how he will increase investment under the plans to reduce debt. Labour’s fiscal policy is therefore contradictory and opaque. Whether the party gets more forthright about its tax-and-spend policy could depend on the government landing some blows. Given the latter’s current form and its own fiscal sleights of hand, this seems unlikely.

This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.

[See also: Keir Starmer: This is what I believe]

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Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team.
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