This Labour government is barely 8 months old, but it has hit a wall. After denouncing the Tories, they let the public believe a bright future lay ahead, if the British public only elected Labour.
Of course, barely a third of the electorate bought into this, by actually voting Labour.
The narrative last summer was strong, however. It was simplistic: evil Tories out, Labour in, end of problem. This has proven to be false.
The economic hole in which Labour have found themselves has not been entirely their own fault. I know, from personal experience of course, that the problem of poor growth has dogged Britain for more than 15 years.
We here in Britain and those in most of Europe have suffered anaemic growth levels since the financial crisis of 2008.
As Angela Merkel identified way back in 2013 when Britain was still a member of the EU, the problem was European wide.
Europe simply wasn’t generating enough wealth to pay for its bloated welfare state.
Europe, she asserted rightly, had 7% of the world’s population, 20% of its GDP but contributed an eye-popping 50% of global welfare spending. This was unsustainable. Europe had to become more productive.
Since then, the problem has got worse. Record high levels of immigration, for which Merkel herself was mainly responsible, have put even more pressure on the bloated states of Western Europe.
The Tories struggled and failed to boost growth. Mass immigration and record amounts of spending during the covid pandemic have made gdp per head actually decrease.
The spending had to be matched by tax increases. Liz Truss and I tried, unsuccessfully, to reverse this ratchet.
Unfortunately, it was too much too soon. I have repeatedly said we tried to do too much too quickly. But by 2024, the UK economy had steadied and the UK was growing faster than any other country in the G7 group of prosperous countries
Then Labour contrived, unbelievably, to make everything a whole lot worse. The socialist budget last October crushed economic growth.
Who thought that raising taxes by £40bn, paid for mainly by business and employers, would discourage investment and lead to poorer growth? We have been taught, for the umpteenth time, socialism doesn’t work.
Reeves, or her Labour overlords, contrived to increases taxes heavily just at the moment the UK needed a boost. Now the OBR will very likely cut its forecast UK growth in 2025 from 2% to a much lower figure.
This will result in a funding gap, as lower growth leads to smaller tax revenues. Less money will be available to pay for the bloated state the Tories failed to reduce, which Labour has no appetite to restrain.
The Chancellor has said repeatedly she will not increase borrowing. She is left with one of two choices: she can either reduce spending or increase taxes. She will increase taxes.
One of my frustrations in government was the constant refusal, born ultimately of cowardice, to reduce government spending.
Too many Tory backbenchers quailed at the thought of spending reductions. Ministers were too timid.
Angela Merkel warned of the size of the welfare state
GB News
Under Labour, there will be no attempt whatsoever to restrain public spending. On the contrary, the sweet heart deals the government announced in its first month, lifting unionised wages by 5% a year, showed labours true colours . They are addicted to spending.
The lower growth rate the OBR announces will lead to a panicked increase in tax, impeding growth still further. Reeves will have a second helping, as it were, of our income through a tax hike.
We simply do not know where this will end, but this state of affairs can’t continue. The question is how bad does it have to get before we change course drastically, and for the better?
