Britain’s in better shape than Labour can admit

Will this really be the worst economic inheritance since the Second World War for a new regime?

Like journalists, politicians are prone to exaggeration, so let’s road test the following. Speaking on the BBC’S Today programme this week, Rachel Reeves, the shadow chancellor, said that “the economic inheritance that the next government will have will be dire … This is the worst economic inheritance since the Second World War”.

Some kind of a case can no doubt be made for the first of these claims: taxes at a 70-year high, public debt at 100pc of GDP, record NHS waiting lists, living standards no higher at the end of this parliament than the beginning, and so on.

But the worst economic inheritance since the Second World War? Ms Reeves seems to have forgotten that leaving things in the most ghastly mess – as in 1979 and then 2010 – is generally speaking a Labour prerogative. So ghastly, in fact, that on departing his position as chief secretary to the Treasury in 2010, Labour’s Liam Byrne scribbled a note for his successor saying “I’m afraid there is no money.”

He wasn’t joking. The previously relatively healthy, though already deteriorating, public finances had been completely destroyed by the banking crisis, leaving the incoming coalition government with little option but to engage in fierce fiscal retrenchment, eventually reversing virtually all the expansion in state spending that Labour had presided over in the previous 13 years of plenty.

The only post-war exceptions I can think of to Labour’s otherwise unmatched record of poisonous legacies are Reginald Maulding in 1964 who wrote to his Labour successor as chancellor, James Callaghan: “Good luck, old cock … Sorry to leave it in such a mess”, and Tony Barber in 1974, who likewise let loose a gloriously unsustainable, “Going for growth” boom that arguably culminated in the later humiliation of an International Monetary Fund bailout.

Otherwise, it’s pretty much Labour that wins the gold every time when it comes to leaving things in worse shape than they found them. Unemployment has been higher on leaving office than at the start under virtually every Labour government since the party’s inception in 1900.

Success in politics is all about dictating the narrative, and it is certainly true that Reeves has become quite good at that. Voter distress is plainly heartfelt, and she seems to be pushing at an open door in depicting the UK as an economic basket case.

The objective truth is very different, yet it is the language of declinism that seems to have captured the public’s imagination, and if it’s not countered soon will become a self-fulfilling prophecy, poisoning international capital against us and turning the country into a pariah.

Is today’s economic inheritance really any worse than at any stage since the war? Worse than 1979, when much of British industry was effectively falling into the sea and the nation was paralysed by a strike-ridden “winter of discontent”? Worse than 2010, when the Cabinet secretary had to instruct the Tories to hurry up and agree a coalition government with the Liberal Democrats or the markets might cause the whole economy to collapse?

I don’t think so, yet Reeves gets away with it. People demand solutions. She has none that I can see to offer, yet they wallow in her depiction of a nation which is on its knees meekly awaiting its final death blow.

I hold no particular candle for the Tories, who unfortunately for Rishi Sunak, the Prime Minister, have after 14 years in power simply run out of road. Even if firing on all cylinders, the Government would struggle against the remorseless grind of the electoral cycle.

As it is, the Conservatives have been particularly unfortunate in the cards they have been dealt. The usual pattern is for a recession once every decade or so, yet over the past 14 years, we have had to confront three particularly deep ones – first the financial crisis, the negative impact of which went on for years; then the pandemic, which virtually bankrupted the country; and finally the energy price shock.

Throw in Brexit on top, which acted as a massive distraction from all the other pressing demands of government, and it is a wonder the economy is still functioning at all.

And yet since 2010, Britain has had a higher rate of growth than all its major peers, including Germany, France and Japan. And though the differences are admittedly pretty marginal, it’s also forecast by the International Monetary Fund to have a higher rate of growth after this year than all three out to 2028.

Far from falling behind in the industries of the future, basket case Britain has given birth to the world’s third largest tech sector, and is streets ahead of the rest of Europe in artificial intelligence. Over the past 14 years, moreover, the UK has attracted more greenfield foreign direct investment than any nation bar the US and China.

We’ve even begun to succeed in those dreaded Pisa studies of educational achievement, where we used to languish at the bottom of the class. Yet at the last count we were 14th in the hierarchy, below some of our smaller European counterparts, but well above Germany, France, Italy and the US.

Even on crime, where Britain is regularly depicted as some kind of Gotham City-like dystopia in which Rolex-stealing gangs roam the land swiping all they can lay their hands on, the bald statistics don’t look so bad.

I’m not saying this is anything like the “golden legacy” bequeathed by

John Major in 1997 to Tony Blair’s incoming New Labour government, when public debt to GDP was still well below 40pc and the economy was already on a tear.

Yet things are very probably better than they seem, and though Reeves is getting her excuses in early by pretending that the country is in a terrible state – giving her virtually no room for action – in fact she may have rather more money to squander than generally assumed.

Many of today’s most intractable problems stem directly from the catastrophe of the pandemic, which hugely added to the national debt, left the health service in ruins, sparked a cost of living crisis and incubated a culture of welfare supported disability.

Yet I didn’t hear Labour opposing any of the largesse the Government heaped on the nation back then. If anything, it wanted even more.

As things stand, the UK has one of the lowest unemployment rates in Europe, and despite the scourge of slothfulness which is said to have settled on the nation since the pandemic, one of the highest labour force participation rates (the proportion of the working age population who do some form of work) in the world.

This is not obviously an economy on the verge of collapse.

You can hardly blame Reeves for making political capital out of Britain’s myriad discontents, but in doing so she comes perilously close to running the country down, and seems to have not a clue what to do about it anyway.

‘Reeves is getting her excuses in early but may have more money to squander than assumed’