Will Labour get lucky with the economy and what happens if it isn't?

Labour has pledged to kickstart economic growth, but will they be able to do it? ITV News Economics and Business Editor Joel Hills explains the party's plan


It is convention for outgoing ministers to leave a friendly note for their successors with advice on how to settle into the job.

"I'm afraid there is no money," wrote Liam Byrne, as he left the Treasury in 2010.

Back then, Bryne felt able to joke about the state of the public finances. Today, it is no laughing matter.

Rachel Reeves will be the first female chancellor to walk through the doors of Number 11 Downing Street and will immediately find herself hemmed-in because money could not be tighter.

National debt in 2010 stood at 65% of UK Gross Domestic Production (GDP). Today it is at 100%.

Not only has debt risen to its highest level in 70 years but higher interest rates have made the stock of debt more expensive to service.

Tax revenues rose by a record amount in the last parliament, public services are fraying and the outlook for economic growth is unheroic.

So, what's a new chancellor to do?

One of the first decisions Reeves will have to make is when to ask the Office for Budget Responsibility (OBR) to prepare its economic forecasts for the economy and the public finances ahead of a Budget.

Labour has said the OBR will get 10 weeks to do this, which means the earliest a Budget can be held is late September.

Rachel Reeves. Credit: PA

That's when we will find out if there are any tax and spending decisions that didn't feature in the manifesto.

Labour has pledged to kickstart economic growth. And the economy needs a kick.

Between 1992 and 2007 - under John Major's and Tony Blair's governments - economic output per person in the UK grew by 45.9%.

In the 15 years since - from Gordon Brown's to Rishi Sunak's governments - it has grown by just 4.4%.

Low growth is a serious problem.

The Resolution Foundation calculates that had pay continued to grow at it pre-2008 pace, the average worker today would be an extraordinary £14,400 a year better off.

From Gordon Brown’s government to Rishi Sunak’s the economy it has grown by just 4.3%.

Labour says it will boost economic growth by delivering political stability, by encouraging business investment and by reforms to improve productivity.

Reform of the planning system, for example, is intended to deliver 1.5 million new homes in England in the next parliament.

That's a run-rate of 300,000 new homes a year - we've not managed that since the 1970s.

The aim here is to improve the affordability of housing, of course, but also to create jobs and to make it easier for people to relocate to where there is work.

To build 1.5m homes in five years, 300,000 new homes will be built per year.

Sir Keir Starmer says he's prepared to "make enemies". He'll need to be because change will be politically painful.

Labour plans to restore mandatory housing targets on councils which the last government ditched under pressure from its own MPs.

Labour also plans to build on the green belt. It argues there are swathes of wasteland and scrub on the outskirts of towns and cities which is more "grey-belt" than green-belt and should be developed.

But Labour hasn't said how much of the green belt it considers to be "grey" or how many homes it thinks could be built there.

Labour also plans to build a series of new towns. How many? Where? Once again, we don't know.

Hopefully, it's in places where people want to live.

The UK’s newest “New Town” is Northstowe, near Cambridge.

The UK's newest "New Town" is Northstowe, near Cambridge.

It is seven years old and has struggled to grow. It still doesn't have a GP surgery.

In addition to a Budget, Rachel Reeves will need to carry out a spending review by the Autumn.

Government departments don't know how much money they have to spend from next April.

The Institute for Fiscal Studies calculates Reeves will need to find an extra £23 billion a year by the end of the Parliament just to avoid deep cuts to investment and spending on unprotected areas of public services.

Where will the money come from? Where might the axe fall?

Labour spent the election campaign refusing to engage with these questions.

Public services are visibly struggling. Prisons are full, courts are backlogged with cases, NHS waiting lists are rising, school teachers feel demoralised and councils, colleges and universities are struggling financially.

High taxes, high debt and struggling public services. This is Labour's unenviable inheritance.

Labour's solution to all these problems: "Kickstart the economy."

It’s a perfectly sensible ambition, of course.

Starmer told ITV News he would like to see the economy grow by 2.5% a year in this parliament. If that happens, and it is feasible, then the really painful political choices would disappear.

But the government's own forecaster, the OBR, has growth of 0.8% pencilled in for this year and 1.9% for 2025.

Labour is banking on growth and has not told us how it will respond if that growth doesn't materialise.

The party promises "no return to austerity" and to "not increase taxes on working people" and to "get debt falling".

Unless Labour gets lucky, it's hard to see how all three can be kept.

Prominent economists are already urging Labour to ditch its fiscal rules.

And, if something has to give, it's probably the easiest promise to break.


With national debt rising to its highest level in 70 years, stubbornly high inflation and under-strain public services, ITV News Economics and Business Editor Joel Hills explains the challenge lying ahead for the new Labour government


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