Growth comes from the efforts of all – not from trickle-down economics
Chancellor Kwasi Kwarteng leaves 11 Downing Street to deliver his mini-Budget (PA Images/Alamy)
Credibility, like reputation, is built slowly over years but can be destroyed very quickly. That is what has happened to the Conservative government in the wake of its disastrous “mini-Budget” on 23 September.
The chaos that ensued in the valuation of the currency, pension and mortgage markets was not because of a specific threshold of government borrowing that cannot be crossed or even because of any single measure that was announced.
It was instead because of a reckless approach which told the markets that ideology had trumped economics. And the statement from the Chancellor a day or two later that this was just the beginning and there would be more of the same compounded the damage and convinced the markets their early scepticism was right.
The package announced by the Chancellor was irresponsible in the extreme
With inflation high and the government already having to fund a necessary intervention to protect people from rocketing energy prices, care had to be taken on whatever came next. But the package announced by the Chancellor was anything but careful. It was irresponsible in the extreme.
Like two right-wing pamphleteers who finally got the chance to test their pet theories, the Prime Minister and Chancellor put together a package of unfunded tax cuts based on the premise it was justifiable to borrow from my constituents in Wolverhampton South East to fund a tax cut for people earning over £150,000 a year. It was not only politically tin-eared but a homage to a belief in trickle-down economics that has been tried, tested and failed.
The consequences are severe. Borrowing costs will be billions of pounds higher than they would have been, and millions will see the cost of their mortgage payments increase sharply over the next couple of years – sometimes by hundreds of pounds a month. Why should people who have worked hard to own their own home pay the price for the Conservatives’ economic incompetence?
Even more damage will be added if the government makes people pay for the mistakes ministers have made with cuts in the public services needed most by the very people being asked to fund the borrowing that has to pay for the whole approach.
The Prime Minister and Chancellor have destroyed any claim the Conservatives have to be the party of sound stewardship of the public finances. The Chancellor admitted the failure of successive Conservative-led governments when he decried the “vicious cycle of stagnation” that has characterised the past 12 years – then made things a lot worse.
Growth is the right question because better economic growth will make the country more prosperous and its citizens better off. But growth will not come from the pursuit of the idea cherished by right-wing think tanks that all we have to do is make those who are already wealthy even better off.
In a modern 21st century, economic growth will come from the efforts of all. From the brilliant start-ups powered by British creativity and innovation. From supporting our world-leading science-based industries. From our great universities. From developing our service economy. From making the most of the transition to a cleaner and greener economy in energy generation, transport, and construction. From investing in the most powerful weapon of all – the skills and talents of our own population. And crucially, from respecting the institutions that have bolstered our economic credibility over the years.
The unforced harm inflicted by the Conservatives on themselves in recent weeks will mean voters are considering Labour in a way that perhaps they have not for some years. They will see a changed Labour Party that will repair the damage done to our economy and match support for wealth creation with the high-quality modern public services that underpin good society – and that is the blend of policy the country needs right now.
Pat McFadden is Labour MP for Wolverhampton South East and shadow chief secretary to the Treasury
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