Ahead of the Budget, Labour still has no economic narrative
As it staggers from crisis to crisis, the Starmer Government is often accused of lacking a political narrative - but it also lacks an economic one.
Britain has become a high-taxing, high-spending economy that delivers low productivity, weak business investment, and stagnant wages. This deters overseas investment, reduces job creation, and ultimately shrinks the tax base. To service the excessive expenditure and ballooning national debt, the Chancellor raises taxes further, and so the cycle repeats. This is the infamous doom loop.
Labour won office by repeating a promise of pursuing policies that will only generate economic growth. Yet since taking power, growth seems to be anything but the priority.
When we reflect on the past year, it is easy to see why this is the case. The Government’s first major fiscal decision was not to incentivise enterprise or productivity, but to award inflation-busting pay rises to train drivers and junior doctors.
Both groups, despite receiving more than most households could dream of, have continued to strike. So public services remain disrupted while commuters and patients continue to suffer from record-low train reliability and not enough doctors.
Meanwhile, Britain continues to grapple with stubbornly high inflation. This stands in stark contrast to the position the Conservatives handed over last year. When Rishi Sunak left office, inflation had fallen to the Bank of England’s 2 per cent target for the first time since 2021. It had been 11 per cent when he became Prime Minister. Not only that, the UK was the fastest-growing economy in the G7. Today we are being outpaced by many of our competitors, including those in the Eurozone. It is a dramatic reversal under Labour.
The Chancellor’s first Budget actively weakened the foundations of growth. Despite promising not to raise taxes on “working people”, the Chancellor announced a £40 billion tax raid, whilst increasing spending by £70 billion - meaning a gap of £30 billion. Productive people in productive sectors were targeted - farmers, employers, hospitality workers, and small businesses.
Unsurprisingly, markets have had to absorb this excess issuance and, in turn, have charged the Government more to borrow. The consequences are felt by homeowners and buyers across the country through higher rates and mortgage costs.
Business confidence has now collapsed to its lowest point since Brexit. Tax and the cost of employment are identified as the biggest pressures. Goldman Sachs CEO David Solomon warned only recently that Britain’s tax regime is “pushing people away” and that the UK’s position as a global financial hub is “fragile” after years of over-regulation and punitive taxation. This should alarm any government serious about growth. Yet the Chancellor appears unmoved.
Instead, Labour has doubled down. The phasing out of the non-dom regime - driven not by economics but by the desire to land a political blow on the former Prime Minister - has triggered a quiet but growing exodus. Wealth creators, investors, and ambitious young Britons are choosing to relocate to Dubai, Portugal, Malta, Italy, and across the world. These are people who spent, invested, employed, and contributed within the UK. Now they are being told, implicitly and explicitly, that their success is unwelcome.
But the attack on ambition does not end there. Labour decided to punish parents who choose to send their sons or daughters to independent schools by imposing VAT on school fees. Often these are parents who sacrifice other things in order to save to afford their children this opportunity. Without independent schools, the state system would be oversubscribed, adding enormous cost to the public finances. Not to mention the impact this has on the Special Educational Needs and Disabilities (SEND) system and the deliverability of Education, Health and Care Plans (EHCPs).
What is worse, Labour has damaged our competitiveness for no meaningful return. The Spring Budget’s much-touted tax raid brought in £300 million less than the OBR had forecast in its first two months. Payrolled employment has fallen sharply. Rising labour costs and higher employer National Insurance contributions have hit young workers especially hard, with 66,000 more under-30s on out of work benefits since the election. Businesses have passed these costs down, driving grocery price increases and contributing to inflation. Even a simple morning coffee has crept above £5.
Then there is the proposed extension of inheritance tax to family farms worth over £1 million - a policy that would break up farming units, render land unviable, and threaten food security. All of this is fuelled by Labour’s bizarre narrative that billionaires are buying up most of Britain’s farmland. France takes a more common sense view. If the owner is the farmer, then they are exempt. On this issue, the French are absolutely right.
And yet, rather than stabilise the economic environment, Labour continues to float new tax rises by the week. Income tax, property taxes, taxes on British holidays, pensions, shares, foreign students, those leaving the country - nothing is off the table. The Chancellor is reportedly considering up to a hundred new tax measures for next Wednesday. This is now the most tax-and-spend government in at least three decades.
In a globalised world, where capital and talent can relocate freely, this is simply unsustainable. The message from the Government is unmistakable - if you are ambitious, if you work hard, if you hope to build a future - Britain may not be the place for you. And so, heading into this Budget, the question for Labour is what exactly is the economic story you are trying to tell?
Because at present, to borrow a famous headline, if the Starmer Government stays on this course, will the last person to leave Britain please turn out the lights?
Dr Neil Shastri-Hurst is the Conservative MP for Solihull West and Shirley.
