Spiteful Sunak has ensured there is no money left - but here’s how Starmer could grow the economy

All governments try to shoot their opponents’ horses, whether by stealing their policies or spending the money the opposition has earmarked for carrying out its own agenda. That is par for the course in politics, but the big problem now for Keir Starmer is that Rishi Sunak seems to have given up on winning the next election and is instead salting the earth so that nothing can grow during the Labour government’s first term. The so-called tax cuts in the Autumn Statement were funded in part by huge, unspecified, multi-year, future cuts to departmental spending.

This is why the Labour leader is warning that the UK will face “huge constraints” on public spending if he wins the next election. On Monday, we found there is a potential £30 billion black hole in the defence procurement budget, that alone is enough to use up every spare penny in the government’s bank account for years to come. But we also know the NHS is on the edge of collapse, schools are crumbling, prisons are full, courts inadequate, policing underfunded and housing a tragic joke.

Therefore, as Sir Keir says anyone expecting a new Labour government to “turn on the spending taps” is going to be disappointed. The only answer, which the Labour leader knows full well, is to increase productivity and growth. Without that we will be even worse off, and the government will be able to afford even less.

Labour does however have some open goals that could and should boost growth; ones which for various reasons this government seems to have been incapable of adopting.

Starmer wants to change the planning laws, which he says are far too restrictive. A huge boost for home building would certainly help growth in the short- and long-term. Building more is good for immediate economic growth and a well-functioning housing market with enough homes, lower house price inflation and the ability to move around for work are all longer-term boosts to productivity.

Labour wants to introduce a proper industrial strategy as well; strangely enough British industry loves the idea too. It has been complaining for years that the Tories are small-minded, lack direction, change policies all the time and have no long-term vision of where the economy should be heading, when the rest of the world seems to know full well.

Sir Keir is also promising to back British business with a competitive tax regime (easier said than done, as the Tories have found out) and “a new direction on skills”. Given the Tories have eviscerated the apprenticeship system without even trying, this is a great idea and will cost nothing. The money is there, it just needs spending better and it can create hundreds of thousands of new skilled workers.

Labour is also planning to create a better work environment for those who have been squeezed by their bosses for years, so no more fire and rehire, better mental health support, an end to zero-hours contracts, and a living wage.

If there is any spare cash after that it really needs to go on infrastructure to boost productivity and growth, but the country is so short of money after years of Tory austerity and incompetence that Labour is wisely making no promises.

Everything therefore is dependent on getting growth back to a higher trend rate and improving productivity and therefore wages, this is Labour’s new “obsession”. With that comes higher tax revenue and more room to manoeuvre.

But it is a very hard trick to pull off without more spending, which is why the Tories seem intent on leaving not a spare farthing for the new government.

Read more from Jonty Bloom on Substack at Jonty’s Jottings