Finally a budget built on investment, not austerity
There’s often a lot of heat and not much light generated when people talk about how to grow the economy, and what growing the economy even means.
Both Keir Starmer’s new government - dedicated to putting money back into working people’s pockets - and Liz Truss’s ill-fated seven weeks in office made economic growth the driving force behind their plans. However, in a bid to generate more heat than light, it pays to explain that their favoured ways of achieving this were very different.
Liz Truss and her party wanted to cut taxes, borrow for day-to-day spending, and take a big bang approach to tackling the stagnation which coincides with the last decade and a half of their time in Government. The Silicon Valley phrase “move fast and break things” could have been tailor made for her administration.
Starmer and his Chancellor Rachel Reeves, meanwhile, focus on long-term investment in infrastructure, the benefits of a regional industrial strategy, the opportunities of new industry and growth areas, and the need for partnership working between government and businesses.
Truss had the germ of an idea but went about implementing it in completely the wrong way – creating chaos in the markets when she should have calmed them; cutting taxes for the wealthy when she should have been investing in public services and infrastructure; sticking to outdated fiscal rules when she should have been adapting them to a changing world.
As a governing party, Labour has learned the lessons of the Conservatives’ disastrous economic policy. Liz Truss and Kwasi Kwarteng’s catastrophic approach to cutting taxes under the guise of chasing growth, is just the natural endpoint of 14 years of a rollcall of Conservative chancellors who failed to borrow to invest when times were good.
Just as importantly, we’ve learned from Labour’s last period in office. Gordon Brown successfully achieved a good rate of GDP growth across many years, but it still too often didn’t reach the parts of the country that needed it the most. Our current approach to growth is rooted in the places where people live and work, rather than the promotion of a single globalised dynamic sector that can fund our ambitions.
There were huge reductions in public sector investment planned by the Conservatives had they won the last election. They are still driven by their blind faith in cutting investment to pay for tax cuts. Their policies are built on the foundation of short-term thinking, when what our country has needed for decades is a framework that encourages investment for the future.
Talk to any business owner in the country, and they will instinctively understand the concept of a return on their investment. The big problem with recent Tory governments - which they continue to be in denial about in opposition - is that there’s been too little return because there’s been too little investment.
If we had raised our investment levels up to OECD averages back in 2010, there would now be hundreds of billions of pounds more in the country - an economic foundation on which the next fifty years of prosperity should have been built. We’d have had the 40 new hospitals Boris Johnson promised us, we’d have replaced the crumbling school roofs full of RAAC concrete, and we’d have seen our transport infrastructure modernised in a way our international competitors take for granted.
GDP per head in the UK today is nearly £11,000 lower than it would have been if pre-2008 global financial crisis trends continued. The choice in 2010, when it mattered most, was between investing in prosperity or imposing austerity. The coalition government and George Osborne chose the path of austerity and to permanently handicap our growth potential.
We should rightly look to eliminate child poverty, put money back into the pockets of working people, and make sure that the economic blight afflicting our towns and villages is addressed, just like the last Labour government invested in our larger cities.
This can only happen on solid foundations. An approach that understands that borrowing for investment is more akin to taking out a long-term mortgage than maxing out your credit card; an approach that recognises we have huge talent and potential in every corner of the UK, but that opportunity is not so evenly distributed; and an approach that resolutely refuses to continually undermine our own economic future on the altar of a right-wing political ideology that has repeatedly been shown to fail.
Patrick Hurley is the Labour MP for Southport.
