No: this isn’t austerity 2.0
3 min read
“Did anybody vote Labour for austerity 2.0?” Victoria Derbyshire asked me on Newsnight last week. The answer is: no, they did not. And this week, we’ll see that austerity 2.0 is not what they will get.
Given some of the commentary around Wednesday's Spending Review, you might be led to believe that George Osborne’s scissor-hands were back in HM Treasury. This couldn’t be further from the truth.
Under Conservative austerity, some government departments had their funding cut by a staggering 70 per cent, and capital spending was slashed, even when interest rates were at record lows.
However, rather than cut departmental spending, the Chancellor has boosted it massively, and the Spending Review will confirm how an additional £50bn a year for public services and investment will be spent.
The state is set to account for 44 per cent of the economy in the rest of this parliament, 4 per cent higher than pre-pandemic levels, and significantly higher than at any point under Tony Blair.
This will support the renewal of our public services and change communities and lives for the better. Lower NHS waiting lists. More police on the streets. Better schools for our children.
We shouldn't forget how big a choice this government has made.
When faced with our economic inheritance – where, thanks to Liz Truss, debt interest costs now account for £1 in every £12 the government spends – Labour could have taken a different path.
Those on the right said we should stick to their fairytale plans to cut taxes and spending. This would have been the road to economic and social ruin. Not only would it ignore the damage of 14 years of austerity, but also our fundamental economic weakness as a country: under-investment. In 24 of the last 30 years, investment in the UK was less than in every one of the other countries in the G7.
To end this decline, the Chancellor has unlocked £113bn of additional public investment, proving that it isn’t “Treasury brain” holding back our country, but “Tory brain”.
It turns out that when politicians who want to do the right thing by our country are in charge, it’s possible to turn things around. This parliament is set to see the highest sustained level of public investment since the 1970s, which will spur on growth – crowding in private sector investment, too.
But still others argue for ripping up fiscal rules almost entirely, and for even higher borrowing. This ignores the economic reality that borrowing costs are higher now than they have been for almost two decades. And the political reality is that permanently borrowing more to keep public services running or make welfare payments would only serve to undermine our hard-won economic credibility with the public.
Instead, this government has increased taxes for investment in public services, and to fund the commitments, for example, on public sector pay, left to us by the Conservatives. Because we won’t accept austerity 2.0, but nor will we accept Truss 2.0 either.
This approach is bearing economic fruit. In the first quarter of this year, the UK economy grew by 0.7 per cent — the fastest growth in the G7. Wages have been rising faster than prices for months now, and interest rates have been cut four times.
And this is just the beginning. The Spending Review, three big trade deals and a focus on the long-term health of our economy. This is the economic change that Britain voted for in 2024 – an end to the chaos, and a return to stability and prosperity.
Dan Tomlinson is the Labour MP for Chipping Barnet.
