The Economic Swamp now facing us

ECONOMIC PERSPECTIVES 159 – JANUARY 2025

The new Labour government, even to its stalwart cheerleaders, has been a disappointment of the deepest dye – for evidence, just consider the diminishing support for Labour in the post-election ratings - or the sheer revulsion so widely expressed in London following Keir Starmer’s honouring of the detested (now “Sir”!) Sadiq Khan in his NY Honours List - the same Khan who expressed deep sympathy to the family of Chris Kaba, the young black gun-toting thug with multiple criminal convictions who, aged 24, drove his £100,000 Audi Q8 into a police cordon and was accordingly shot in the head. Khan accused the Met of racism, and the officer was of course charged with murder. At his trial in October he was acquitted.

Back to economics. Before Labour was elected its leaders appeared to understand that a different approach was needed at this time. In a speech in December 2023 Starmer declared: “Anyone who expects an incoming Labour government to quickly turn on the spending taps is going to be disappointed.” He appeared to understand that increased investment in the public realm should not be funded by a further increase in our historically high tax levels, or from more borrowing when public sector net debt already equates to the nation’s entire GDP. No, he said, Labour will stimulate the level of wealth creation only possible in the private sector, and will encourage the entrepreneurship that will eventually fund investment in public services.

But if he actually understands his own message, there is no sign that he passed it to any members of his sorry team. Indeed, not a word of it has, in any meaningful sense, been conveyed to them – for it has been obvious from day one that they are paddling away in precisely the opposite direction. Starmer’s message to the nation might more accurately have been that the new Labour administration’s first priority will be to indulge in extravagant spending on failed public sector projects, even if that requires still more ballooning costs on the Hinckley Point reactor and HS2, and requires business taxes to be raised ever-higher.

One effect of 14 years of pathetically aimless, misdirected Tory misrule was to allow Starmer and his buddies a 14-year opportunity to pick up a few pointers on how to correct the tide of Tories’ economic ineptitude and to learn something about the rudiments of how economic growth and opportunity are realised. Far from growth being Labour’s “obsession”, as Chancellor Rachel Reeves promised the suffering nation, Labour’s traditional brand of indefensible tax rises was her preferred option, adding into the mix her attacks on successful businesses and individuals – yes, parading the same old socialist envy of success and – dare I utter it – wealth. Anyone with half a brain knows full well that these obsessions fail socialist governments every time they are resurrected, and they are assuredly failing now.

This is the unvarnished economic reality of the new Labour government.

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[EMILE WOOLF – JANUARY 2025 – Economic Perspectives 159]