Labour is making a political choice with its ‘austerity’ plan - Bill Carmichael

In a message to the country delivered from the Downing Street garden, Sir Keir bluntly warned: “There’s a Budget coming in October - and it is going to be painful.”

He added that he had “no other choice” given the grim financial situation we are in.

Well, I suppose you can credit him for his honesty, but only the most naive among us can think anything other than we are being softened up for big, damaging tax increases in the Autumn.

Despite the fact that the current tax burden on working people is already the highest for 70 years, most of us before long will be forced to throw yet more of our hard-earned cash into the insatiable maw of out-of-control government spending.

The government’s rationale for this austerity on steroids is that there is a £22bn “black hole” in the nation’s finances, and the only way it can be addressed is by ruthless spending cuts and heavy tax rises.

Some cuts are already apparent, and are clearly deliberately targeted at the elderly and vulnerable, for example the means testing of the winter fuel allowance, and the decision to axe the proposed limit on adult social care costs proposed by the Dilnot Commission over a decade ago.

But there are a number of significant problems with this government narrative. Firstly the notion that Labour has inherited a basket case economy is directly contradicted by cold hard facts. Official statistics demonstrate that the UK economy is going absolute gangbusters, with the highest rate of growth in the first half of this year in the entire G7.

Now I have been a strident critic of the past Conservative government. They put up taxes way too high, which resulted in stunted growth as a whole, and failed to control government spending. And the pandemic and the war in Ukraine are only partial excuses.

But for the current government to try to spin a tale that the Tories brought the economy to the brink of ruin is simply preposterous. Inflation seems under control at 2.2 per cent, and household disposable incomes are finally on the rise after the cost of living crisis.

Above all, not only is the British economy miles ahead of moribund growth rates of France and Germany, but we are even outripping the normally vibrant USA. Far from being handed an economic mess, as they like to pretend, this government has been bequeathed a golden legacy of growth. Let’s see what they do with it.

Secondly, about half of the £22bn ‘black hole” in the nation’s finances is as a result of public sector pay increases. If the government hoses its friends in the public sector with lots of cash in the form of no-questions-asked, inflation-busting pay increases, simply as a reward for going on strike and causing misery to millions, is there any wonder there is a crisis in public finances? There is indeed, but it is largely of the current government’s own making.

But there is a wider problem with this narrative. For the last 14 years Labour and the Left have argued that the ‘austerity’ inflicted on the country from 2010 onwards was a political choice, and not an economic necessity.

In other words, the cruel, evil Tories deliberately imposed “savage cuts” on the country entirely without cause for vindictive and ideological reasons.

Incidentally as an aside, throughout the entire period of Conservative rule, during the time of so-called ‘austerity’ and ‘savage cuts’, it is important to remember government spending on public services rose inexorably. In truth ‘austerity’ was largely a myth.

But either way the current government is reduced to arguing that whereas Conservative austerity was unnecessary and ideologically driven, Labour’s current austerity is necessary and driven by economic circumstances. I am afraid it won’t wash. If austerity was a political choice in 2010, then it is a political choice in 2024.

The Conservative’s mistake was to fail to control public spending, which forced big tax increases, which in turn suppressed growth. I see absolutely no sign that Labour have learned these important lessons.