Don’t be fooled again – Labour’s economic narrative doesn’t stack up

The latest official statistics from the Office for National Statistics for May showed GDP growth at 0.4 per cent – one of the fastest monthly paces since 2000 – composed of services growing by 0.3 per cent, while construction was up by 1.9 per cent and production up by 0.2 per cent, after both of the latter two had fallen 1.1 per cent and 0.9 per cent in April.

Inflation is back to 2 per cent – on target and below the eurozone and US – which is very helpful for providing an interest rate cut that should cheer up mortgage payers.

Likewise, unemployment is 4.4 per cent – lower than at any point under the Tony Blair and Gordon Brown administrations.

Labour Chancellor Rachel Reeves has hinted that public sector workers south of the border could be in line for a pay rise above the rate of inflation. Picture: Getty Images

When it comes to Labour making political choices to go for growth, it cannot be said the momentum is not already there.

One could be forgiven for declaring the encouraging economic news arrived just in time for a late autumn election – only some fools in 10 Downing Street convinced Rishi Sunak he should go early and, confirming his lack of political antennae, he stupidly agreed.

I am not for a minute saying Sunak could have won an election were it held later this year, but I do think such improved economic figures could have helped save a good swathe of Tory seats that would have made Sir Keir Starmer’s majority much slimmer.

Let’s remember, under the narrative the UK economy was doing badly – and in particular aspects such as government debt it still is – Labour’s vote share hardly increased (only 1.7 per cent) and even in Starmer’s own constituency the Prime Minister-in-waiting polled 10,000 fewer votes notionally than in 2019.

Chancellor Rachel Reeves and her Labour colleagues want to tell us they have come to power with the worst economic inheritance since the Second World War so that such a calamity justifies especially aggressive taxes on groups such as pensioners, savers, property owners, the self-employed – in short the prosperity creating private sector and private wealth that invests in future economic growth.

Yet compared to the handover of power in 2010 when a Conservative and Liberal Democrat coalition took up the reins from Labour, both inflation and unemployment are nearly half of what they were then, and we have the fastest growth in the G7. We also learned the UK is the third largest recipient of venture capital investment, overtaking India and only behind the US and China.

The next year’s economic progress is also looking more positive, not suddenly because Labour is in power, but because the data is telling us so. The International Monetary Fund has again revised its estimates for UK growth in 2024, up from 0.5 per cent to 0.7 per cent, while Standard and Poor has the UK at the top of its economic expectations rankings, ahead of the US and well clear of the Eurozone. Meanwhile Germany is being challenged by France for the title of sick man of Europe, yet we are still told Brexit has failed us by people who ignore the data.

There is much to criticise in the first King’s Speech of Starmer’s government, but Conservatives should be careful – just under half of the Bills proposed are the same or very similar to what the Conservatives were proposing, such as the ludicrous ban on smoking for people born after 2009.

The King’s Speech stands as a testimony as to just how much the Conservative & Unionist party had deserted both conservatism and unionism in the fields of economics, deregulation, and confirming the Irish Sea border through Sunak’s Windsor Agreement.

Now we are going to get the worst of the Conservative policies with the addition of Labour’s partisan hobbyhorses such as making private education even more elitist and shifting political decisions away from democratic accountability towards technocratic cabals in global and European organisations.

As an example, in government finance the unaccountable Office for Budget Responsibility (OBR) that has an appalling record on estimating future economic outcomes will be given new powers of oversight so it can supposedly limit the role of future governments. This is a fraud – the government appoints those who run bodies like the Bank of England and OBR, stuffing them with supporters, and then claims they are independent.

We can expect yet more interventions in the personal realm, involving the suppression of life-saving vapes, new limits on gambling, alcohol and foods.

But most of all we can expect more taxes – most likely on property values, property rentals, property inheritance, savings, pensions and a broadening of what taxes cover as well as pushing some tax rates up on so-called luxury goods.

This will be justified by Reeves’s bad economy narrative and the “we did not know how bad it really was” myth that has already been roundly condemned by the Institute of Fiscal Studies. The facts around the poor public finances are already well known and out in the open.

Yes, taxes are now the highest for some 70 years, but that’s because spending is high too – and Labour wants to increase both.

Yes, public debt is higher in 2024, but if our governments keep borrowing more – and both the Conservatives and Labour promised to do just that – it means debt will inevitably be higher. Labour will seek to disguise some of it using expensive PFI schemes that pushes debt into future current account spending.

With the likelihood of expensive above inflation pay settlements for nurses and teachers – without any productivity gains – we can expect a larger and less productive state sector, paid for by the productive private sector through increased taxes. That is not a recipe for economic growth and lower debt, but the reverse.

Meet the new boss. Same as the old boss. Let’s not get fooled again.

- Brian Monteith is a former member of the Scottish and European parliaments.