View all newsletters
Sign up to our newsletters

Support 110 years of independent journalism.

  1. The Staggers
13 July 2023

Labour’s fiscal paradox

Keir Starmer is doing everything he can to not be Liz Truss – but does that mean he’s just Rishi Sunak?

By Freddie Hayward

Liz Truss’s ghost lives on. But she is haunting the Labour Party. In the ruin of the mini-Budget, Labour saw an opportunity to usurp the Conservatives as the party of fiscal responsibility. But at what cost?

The party ceded a lot. It lambasted her attempt to achieve growth through unfunded borrowing. This was the kamikaze Budget, the one that bankrupted the country. So eager was Labour to forget Liam Byrne’s 2010 letter to his Treasury chief secretary successor, which said there was “no money left”, it wielded Truss’s ideological pursuit of growth as a shield against accusations that it was profligate.

But Keir Starmer was the first politician to champion economic growth. In July last year, he argued, definitively and largely unnoticed, that growth would define Labour’s next manifesto. Borrowing to fund growth is central to Labour’s programme for government.

Through its condemnation of Truss’s approach to public finances, the party has constrained itself. In the 1997 election campaign, New Labour had to promise to stick with Tory spending plans to counter fears rooted in the 1970s that it would tank the economy. As Phil Tinline notes in his book The Death of Consensus, Blair said in March 1997: “I have staked my political reputation and credibility on making clear that there will be no return to the 1970s.” With similar fears in a post-Truss world, Starmer’s Labour has bought into the Sunakian way of viewing public finances.

[See also: What could go wrong for Keir Starmer?]

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.
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

The core criticism of Truss at the time was not that borrowing to fund growth was wrong, but that tax cuts wouldn’t achieve the growth she promised. Borrowing to invest is another matter – a distinction Labour rarely makes.

Rachel Reeves says she wants to grow the economy and for the national debt to fall, while at the same time arguing the economy needs investment (read borrowing) to ditch the sclerotic growth of the past 13 years. That would work if Labour gave itself enough time to see a return on its investment, ie growth. Labour is coy about what its fiscal rules are, but Starmer has started saying, as he did in Leith recently, that debt will fall within the first parliament. That’s five years. The same time-frame that Jeremy Hunt chose. The paradox of Labour’s policy is that, in the short term, growth and falling debt are in opposition.

I hear you: a party’s messaging is distinct from its policy. We must determine how much of what they say is pure posturing before an election, a tactic to minimise exposure to Tory attacks, and how much will genuinely be followed through in office. But what if a party’s messaging before an election constrains what it can do in power?

I don’t want to sound too Gramscian, but a consensus must be built before change can occur. You have to win the ideological battle before you can win the policy war. My concern therefore is that Labour has constructed a fiscal straitjacket that prevents it from achieving its own aims.

It was alright for Blair and Brown because they inherited a booming economy. But Starmer does not have that luxury. Labour must change what is deemed politically acceptable to voters and the media to prevent a backlash once it is in government. As we saw with Truss, we mustn’t underestimate the impact that such a negative response can have. The alternative is to shadow a government that has presided over an historic degradation of living standards, the public realm and Britain’s social fabric. The alternative is a preservation of today.

This piece first appeared in the Morning Call newsletter; subscribe to it on Substack here.

[See also: Will Labour level up?]

Content from our partners
Labour's health reforms can put patients first
Data science can help developers design future-proof infrastructure
How to tackle the UK's plastic pollution problem – with Coca-Cola

Topics in this article : ,
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.
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU