Labour’s budget con trick

Throwing billions of borrowed money into a broken system is no solution to any of our problems

It’s hard to believe that Labour have actually only been in power for 116 days.
One hundred and sixteen days of adviser resignations, expenses hypocrisy, skirmishes with international investors, throwing money at their friends in the unions, deceiving us about the UK’s finances and surrendering of national sovereignty. For those of us who believe in constructive opposition, there’s precious little to be constructive about. Just how can they be so bad?
So it will prove again tomorrow when Labour present their first budget in fourteen years. And they’ve already let slip that, within it, they are going to attempt a major con trick – one which will reverberate down the decades and which our children and grandchildren will be paying for. Most incredibly, it is also one which, because they have no plan, will do nothing to make the lives of ordinary people better.
And what is that con trick? Changing the UK’s fiscal rules so that the Government can borrow more taxpayers money to spend on capital and infrastructure.
“We will be changing the measure of debt,” Rachel Reeves boasted last Thursday. We don’t know the exact detail yet but we do know that it’s coming. And, with those eight words, Reeves is about to go on a spending binge with the nation’s credit card, throwing billions into an unreformed system which will take the money but not deliver the results.
At first sight, unleashing a wave of money to build new roads, railways and hospitals sounds great. Yet, nothing in this world is ever free. Changing the rules doesn’t change the fundamental position the UK is in; there is no magic money tree which has suddenly been miraculously found. This is a technical change which, however it is dressed up, is ultimately more borrowing. And it’s about time that Labour levelled with people about the consequence of their attempts to fiddle the figures.
Firstly, this is a fundamental breach of trust. Earlier this year, Labour won power on a manifesto of their fiscal rules being “non-negotiable”. Nowhere in that long document did it state that a change would be made to those rules which could increase the UK’s borrowing by up to £50 billion. We’ve just seen what the electorate did to the Conservatives when trust was forfeited. Playing fast and loose with the nation’s finances means playing with fire.
Secondly, technical changes have real world consequences. Ultimately, debt is debt. The more we take on, the more risky and less resilient our country becomes to investors. As soon as Reeves dribbled out news of her con trick, yields on UK bonds started to rise. Some commentators now expect interest rates to be cut more slowly. Every month that interest rates don’t come down means another 120,000 households across the country fixing their mortgages higher than they otherwise would. And, over time, higher gilt rates means higher taxes or lower spending elsewhere. For a Labour Party which mercilessly hounded Liz Truss in 2022 for real-world impacts, the principle is the same. Actions have consequences – and Labour appear to have learnt nothing.
Thirdly, this announcement shines a light on the utter incoherence at the heart of the Starmer project. Today, Rachel Reeves is conjuring up billions of pounds out of thin air to invest in infrastructure. That would be the same Rachel Reeves who, in late July, cancelled a raft of infrastructure projects as there was no money. This announcement comes too late for the A303 Stonehenge tunnel, the A27 bypass at Arundel and the 23 ‘Restoring Your Railway’ fund schemes all of which were chopped by Reeves just a few short weeks ago. Labour doesn’t know whether it is coming or going.
Fourthly, and most unforgivably, this raising of the cost of mortgages for many people in our country is almost certain to fail. The delivery of infrastructure has been slowing for years in our country, bogged down by increasing judicial review, never-ending consultations, nihilistic activism, over-extended quangos and useless legislation designed to protect the environment which does no such thing.
Most major projects take a decade, if not longer, to be built. Millions of pounds more are spent in getting spades in the ground than a decade ago – and, even once projects get going, costs usually balloon. My party was slowly trying to fix it; Labour don’t even have a plan.
Take one big example – the new Lower Thames Crossing which, if built, will be the first new major road crossing of the Thames in decades. So far, we’ve spent £300 million on paperwork and it hasn’t even got planning approval – a decision which Labour, earlier this month, decided to delay. Norway actually built a tunnel three times as long for less money. If Labour don’t reform the system to speed it up, then all of this money going on our debt pile will just get eaten up by arguments over bats, skirmishes with Natural England and holidays for expensive consultants.
When I put my name forward to be leader of the Conservative Party, I said that the system was broken. It’s nowhere more obvious than in how we build infrastructure in the UK. What I didn’t expect was that Labour would compound this mess by throwing precious taxpayers’ money into an unreformed system and break their own promises with the British people in the process.
And, within this, there is a warning for my party. Labour’s Budget travails are a great example of what happens when politicians promise simplistic solutions but don’t do the hard graft. This is what happens when you haven’t done the thinking, promise policies without detail and when you haven’t got a plan. If I have the privilege to be the next leader of the Conservative Party, that’s a mistake we won’t make again.