Have Keir Starmer and Rachel Reeves gone mad? What do the Prime Minister and Chancellor of the United Kingdom think they’re doing? Genuinely, do they have any understanding of the economic and political catastrophe that is about to befall them, their government and the nation?
It’s now just more than two months since Reeves stood at a podium in a factory in Oxfordshire and tore up her entire economic strategy. Until that moment her priorities had been clear. Filling the ‘black hole’ left to her by the Tories. Investing in the vital public services she claimed had been neglected during 14 years of Conservative misrule. And raising the tax revenue to pay for it not from hard-pressed British workers but from business.
Then came her conversion on the road to Eynsham. Speaking from a lectern emblazoned with the words ‘Kickstart Economic Growth’, she declared: ‘Economic growth is the number one mission of this government.’ On her watch, Britain would be reborn, through ‘the vibrancy of our high streets. And the thriving businesses that create wealth, jobs and new opportunities for us, for our children, and grandchildren.’
On Friday morning we got to see precisely how vibrant those high streets and businesses actually are. According to figures released by the Office of National Statistics, in January the UK economy contracted by 0.1 per cent.
This news was greeted with surprise in some quarters. Though it’s not entirely clear why. Because, as a result of the policies the Government are pursuing, economic regression is now as certain as the setting of the sun and the rising of the moon. Starmer and Reeves are attempting to kickstart growth at the same time they are imposing £40billion of tax rises on British business, introducing a new Workers’ Right Bill and pushing ahead with a drive to reduce UK emissions to net zero.
Of itself this represents economic illiteracy on a par with anything attempted during the fiscal psychosis of the 44 days of the Truss administration. But that’s not where the insanity ends. Last week it emerged ministers have been told that as a result of the decisions taken in No 10 and No 11 Downing Street, they now have to be prepared to implement brutal spending cuts.
At least £6 billion is earmarked to be axed from the welfare budget. But other non-protected departments are said to have been ordered to find savings of up to 11 per cent. Something which led one Cabinet minister to observe to me: ‘What is the purpose of this government? What are we here for? What is the Labour Party actually for any more?’
It’s an entirely legitimate question. There have been Chancellors and Prime Ministers (normally Conservative), who have cut taxes to stimulate growth. There have also been Chancellors and Prime Ministers (normally Labour) who have raised taxes to protect and invest in public services. But Starmer and Reeves must be the first politicians in living memory to actively pursue a fiscal agenda of simultaneously raising taxes, stifling growth, suffocating business and slashing public services.
There were occasions in the 1970s when the Government found itself backed into an economic coffin-corner. But that was primarily a reaction to global oil shocks and currency instability. What we’re currently seeing is a deliberate policy that seems driven not so much as a reaction to events, or even some proto-Marxism, but a basic lack of understanding of how economics actually works.
Here is a passage taken from that venerable tome Economics For Dummies: ‘Increasing government purchases of goods and services or decreasing taxes can stimulate the economy.’ Our new government is doing precisely the opposite. While literally claiming growth is their priority.
To try to deflect from this nihilism, Keir Starmer has attempted to dress it up as some form of Musk-like rationalisation of an unwieldy state – with some success. The announcement he had decided to abolish NHS England was met with applause across the political spectrum.
Though it bemused some of his own ministers. ‘I was a on a trip, and when I first got the message it looked as if we’d just privatised the NHS. It took me a few minutes to check,’ one told me.
But that sleight of hand will not bamboozle the voters for long. Sir Keir can talk about a leaner state, a more agile state or a state rejuvenated by the white-heat of Artificial Intelligence all he likes. The British people are simply not going to put up with another round of austerity driven erosion of their basic services.
In 2024, the Tories were ejected from office because the voters had come to the view the fabric of their society and their communities was crumbling. ‘Nothing works,’ was the phrase heard most frequently by politicians and canvassers during the Election campaign. And if Keir Starmer cannot find a way of reversing that societal decay, he is going to reap a political whirlwind as violent as the one that tore apart Rishi Sunak’s administration.
‘Our private polling is clear. People want more nurses, police and teachers,’ an exasperated Cabinet minister told me, ‘and they’re not going to get them through AI.’
Some people within Downing Street are hoping Starmer’s reinvention as an international statesman will give them sufficient breathing space to push through their cuts. But in reality the reverse is true.
Unless the Prime Minister is careful, his dual assault on the economy and public services is going to start to contaminate his Ukraine policy. Indeed, some Ministers believe this is already starting to happen.
‘I’m now getting people saying to me, “How can we afford drones for Ukraine when we can’t look after our pensioners and the disabled?”‘ one reported to me.
Starmer and Reeves had two viable options. The first was to reduce the tax burden, stimulate the economy, and then use growth to rejuvenate the nation’s ailing public services. The other was to raise taxes, reinvest them in public services and gradually repair an austerity-exhausted nation.
But they have opted for an economically, socially and politically reckless Third Way. Smother the economy, take a chainsaw to services and pray people still blame it all on the Tories.
Those prayers are not going to be answered. The Prime Minister and the Chancellor are pursuing the economics of the madhouse. And the people of Britain are too hard-headed to tolerate this for long.
