Labour’s plan for growth doesn’t work, as Starmer’s stance on energy shows
Keir Starmer wants to achieve growth, but he’s not explaining where he’ll get the money for the initial investment. Labour’s plan for growth is flawed, especially the part about energy, writes Will Cooling
This autumn will mark the fifteenth anniversary of the crisis that saw nations across the world take unimaginable emergency measures to rescue their financial sectors. Britain led the way in saving the banks, but in doing so lost a business model that had seen it become both more prosperous and more equal than ever before – with New Labour being comfortable with people in the City getting filthy rich, providing they could tax the proceeds.
David Cameron and George Osborne thought they had the answer to the Great Recession, which was to reverse much of the public spending increases that Gordon Brown had quietly paid for by raising stealth taxes and increasing borrowing. But the economic recovery they presided over was built on low wage jobs which created the problem of next to non-existent productivity growth that their successors have unsuccessfully tried to grapple with.
Sir Keir Starmer believes he has the answer to this problem. He wants to use state investment to kickstart economic growth by building better infrastructure and upskilling the workforce. Indeed, earlier this week he was in Brighton selling Ed Miliband’s £28bn green investment fund as a way for Britain to secure the jobs of the future to trade union activists. He and his Shadow Chancellor believe they can create a flywheel where increased investment creates the economic growth that then pays for additional investment, to the point where Britain becomes the fastest growing economy in the G7.
But that naturally raises a key question: where is his Shadow Chancellor going to find the money for the initial investment? This is a challenge made more pressing by the dilapidated state of the public services, which will also require investment, and the high-level of taxes that we’re all already paying. This has led to the rather humorous sight of Labour frontbenchers repeatedly spending the proceeds of the few uniformly popular tax rises that Rachel Reeves feels comfortable in proposing.
While such gimmicks might be enough to get a politician through a media interview, they would quickly be found out should Labour find itself in government. This is especially true as additional borrowing will only increase inflation and the downward pressure on the value of the pound. Liz Truss’ premiership was destroyed by the incoherence of her economic policy. Boris Johnson went down for a number of reasons, but one of them was his inability to to fund the lavish promises he had made back in 2019. Just like them, Labour needs a real answer as to how they will pay for everything they want to do in office.
That will have to come by Labour identifying areas where regulations are holding back economic activity. Starmer himself identified one possible area where this could be achieved, by promising to overcome nimby objections to build more houses. Which makes the idea that a future government may ban future oil and gas exploration in the North Sea so depressing.
Obviously, it’s vital that Britain moves away from using fossil fuels as quickly and as thoroughly as possible. But the key word in that phrase is “as possible”. Nobody was celebrating last year’s rapid energy price increases as the perfect moment to reduce gas usage; indeed Labour repeatedly urged the government to go further and faster in providing extensive energy bill subsidies. Likewise, nobody is sorry that prices are now coming down because Britain and our neighbours have moved quickly to take more deliveries of liquified gas from America and the Middle East.
So, if we’re still going to rely on fossil fuels, why would Britain reject the opportunity to earn money by providing more of the fuels that itself and its neighbours rely upon? There’s no reason other than to please the most unthinking environmental activists, who are not only overconfident about the ability of renewable energy to meet everyone’s needs but also aren’t taking into account the broader economic challenges facing Britain.
The current Labour leader has previously admitted the leader he most sees himself in is Harold Wilson. Faced with industrial unrest, high inflation, and low productivity Wilson was often reduced to telling people that Britain couldn’t afford to pay itself more than what it earned. With similar challenges facing us today, Sir Keir Starmer would do well to remember that.