More than a decade of austerity and poor economic growth left the UK ill-prepared for the ravages of Covid-19. As well as a high death rate, we ended up with the biggest hit to our economy in the G7. Recovering from Covid-19, the cost of living crisis and the climate emergency are huge challenges that we must face together. They require a government with a vision capable of rising to them.
Instead, this government has trapped the UK in a cycle of low growth and high taxes. And the consequences of the Conservatives’ failed economic approach were evident in the chancellor’s recent spring statement. Rather than taking steps to boost growth and productivity, he chose to raise national insurance contributions and place the highest tax burden on working people since the 1940s.
We desperately need an alternative model that prioritises sustainable growth, fairly distributed, not just a short-term bounceback from the pandemic, which will be eaten away by high inflation. Getting it right will mean the difference between declining public services and services that prevent ill health, between poverty and healthy living and between high taxes and low taxes for working people. And we need to have sustainable growth that does not come at a cost to the planet. Labour has a plan to spread jobs and opportunities across the country, invest in the green transition and allow Britain to compete in the global race for the jobs of the future.
We want to see proper investment in jobs, technological innovation and skills, in both the public and private sectors. This is a win-win that drives up growth and living standards, increases funding for public services without increasing taxes on working people, and drives down environmental degradation. We want economic growth that comes from increasing productivity, getting more from the resources we are using, rather than using more resources in an unsustainable way. Labour’s vision is of a high-skill, high-wage, high-growth, low-carbon economy with outstanding public services. Above all, Labour wants to spread security, prosperity and respect across our country. This is possible but it requires ambition and political will.
A Conservative low-growth, high-tax cycle is holding Britain back
First though, it is worth setting out how we got here. A wasted decade of low growth under the Conservatives is holding Britain back. It has left our economy weakened and ill-prepared for shocks. The Conservatives repeatedly cut government spending before economic recovery bedded in properly, choking off growth. Now we are left with high inflation, high taxes and a cost of living crisis. According to the IPPR, one in six working households cannot make ends meet.
Historically, Conservative austerity stalled the recovery after the 2008 global financial crisis and the UK never got back to its previous trend growth rate. The Resolution Foundation estimates that if the economy had grown in 2008–2019 by the same amount as it did before then, we could have had a staggering £200bn more per year to spend on world-class public services or Covid-19 emergency relief
Under austerity the state shrank, but taxes did not. In effect we were paying the same or more tax for worse services. And taxes including council tax and national insurance are going to rise, with a freeze too on the income tax threshold – disproportionately hurting those already struggling with high inflation including food costs, energy bills and petrol. Never before have people paid so much and had so little back in return. This pain is compounded by Tory incompetence on delivering Brexit, hurting our ability to trade and decreasing GDP even more.
The Conservatives have failed on business investment
It is not just the state that has been cut back. Private enterprise has not realised its full potential either. In the nine years leading up to the pandemic, the UK ranked third last in the OECD for investment as a proportion of GDP. In 2019, the UK invested a fifth less than other advanced economies, equivalent to around £90bn. Indeed, business investment was actually lower in real terms in 2019 than it was in 2016, falling for three consecutive years from 2017.
And the Conservatives’ record is not set to improve: the IMF ranks the UK 35th out of 38 advanced economies for investment in the next five years, an investment gap worth nearly £800bn.
Labour’s plan to build a strong economy
How can we overcome these immense challenges, and ensure that people across Britain achieve the prosperity and security they deserve? The answer will be in putting forward credible but radical policies aimed at kick-starting our economy, improving lives and helping business and public services to thrive. I am proud to represent the Hampstead and Kilburn constituency in London, a city that greatly contributes to our economic and cultural lives, and which would benefit hugely from an ambitious Labour government. However, we need to make sure that opportunity and prosperity is equally spread across the UK.
To start with the immediate issues: if we were in power now, we would relieve the immediate cost of living crisis by offering direct help to the poorest and a cut in VAT on energy. This would be paid for by a oneoff windfall tax on oil and gas producers who have enormously profited from the crisis. We would not be going ahead with the national insurance rise at the worst possible time – a rise that will hit families and businesses hard with no plan to actually address any of the problems facing our health and social care sector.
To tackle the longer-term structural issues, we would invest £28bn per year until 2030 as part of our climate investment pledge. This would do so much to create jobs and boost industry: from insulating 19 million homes across the country to greening our steel industry, it is a pledge that would get our economy firing on all cylinders. We would use procurement rules to buy, make and sell more in Britain and boost research and development across our public and private sectors. We would support businesses and our high streets by scrapping business rates, replacing them with a fairer system fit for the 21st century. For economic stability, we would apply strong fiscal rules so that necessary investment and sustainable public finances go hand-in-hand.
Labour’s vision for the UK’s financial services
As Shadow Economic Secretary to the Treasury, I will be working with Labour colleagues to set out our vision for the UK’s financial services. Supporting the sector to thrive will be fundamental to our economic recovery and to delivering the higher growth, jobs, and tax receipts we need to fund public services. The financial services sector employed over 1 million people in 2021 but, despite this, the Conservatives hung the sector out to dry during negotiations with the EU, giving it barely a mention in the Brexit deal.
If we are going to make Brexit work for the UK’s financial services, the sector must be ready for the challenges of the future. This will require a proactive government to provide the space and regulatory landscape for financial services to innovate. That’s why Labour wholeheartedly welcomes developments in financial technology – or fintech – which will allow companies to experiment with new finance models and create high-skilled jobs for the future in every region of the UK.
Our financial sector will also be key to securing a successful transition to a green economy. As we shape our financial services sector outside of the EU, there will be opportunities to ensure that more is invested in green technology through pension funds and other innovative financial devices.
Delivering for the whole of the UK
A Labour government will put our mission for prosperity, security and respect at the heart of what we do. We will create a transformation in living standards across the UK, from Swansea to Stockport, and from Nuneaton to Newcastle – and in Scotland and Northern Ireland too. It is not just the Conservatives who are failing, the SNP is not up to the job either. The SNP’s failure to properly manage the economy means that Scotland has some of the lowest wage growth and labour market participation of young and old than anywhere in the UK.
They have failed to take action to deal with poverty, including for instance ignoring Labour’s call for a £70 supplement winter fuel payment and freezing rail fares. Scotland desperately needs change.
Northern Ireland would benefit from our approach too, not only because of the measures I have outlined above, but also by us taking pragmatic steps to fix the gaps in the Brexit deal, improving life for those in Northern Ireland.
What will all this mean?
There is a future open to us of high-quality jobs, new, green infrastructure from energy systems to transportation and of a prosperous UK exporting the latest green technologies. It is a future with a thriving, highly skilled workforce exploiting opportunities in technologies like AI as well as our traditional strengths in, for example, culture and finance, of which we are rightly proud. It is a secure future where your background, where you come from, and where you live do not affect your life chances. The Labour party is determined to fight for this future: we need to strain every sinew together to make it happen.