Caution, not grand plans, is needed if Labour is to build wealth in Britain

Everyone wants the Labour leadership to be more honest with the electorate about how it will pay for policies designed to drive growth, tackle the climate crisis and improve living standards.

Without a jolt to the economy from tens of billions of pounds of extra spending, they argue, growth will remain sloth-like, only inching ahead, and the Labour project will be doomed.

Tory-supporting newspapers are asking the question for their own reasons, saying Labour’s ambitions must still, despite being scaled down, herald higher taxes.

Many Labour supporters who want a more activist state want to know why Keir Starmer and Rachel Reeves have refused to lay out a broader canvas, one that depicts an active, reformist programme.

And they also want Starmer and Reeves to explain to the voting public that, in the absence of higher taxes, extra borrowing is the solution to a lack of funds and can be justified by the long-term benefits.

Activists calling for this boldness say the party needs to pursue policies of devolution and nationalisation, lining up the billions of pounds needed to achieve both aims. Again, it follows that such grands projets could help give the nation the electric charge it needs to wake from a 14-year slumber.

What seems strange, as the attacks against Starmer become more aggressive, is how little regard is paid to the electorate and what voters have come to understand about the economy since the 2008 financial crash.

There is a leftist belief that the arguments for extra borrowing and a larger state are already won, or if not won, then could be adopted by the next Labour government safe in the knowledge they will succeed.

Starmer and Reeves can see little evidence of voter support for an economic revolution based on either much higher taxes or higher borrowing. These are difficult economic times and people are understandably nervous.

If they turn half an ear to reports by the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD), they will hear how the UK’s 97% ratio of debt to national income, or gross domestic product (GDP), is already too high.

Should they turn on the evening news, they will see charts showing that by 2027-28 the ratio of tax to GDP is on course to reach its highest level since the second world war.

The influence of ostensibly independent international arbiters of “economic laws” is always underestimated. One of the triggers for the political strife in France is a recent downgrading of its ability to pay debt interest by one of the big ratings agencies. Emmanuel Macron’s ministers have been scrabbling to save more than €10bn this year to prevent another downgrade should the ratio of debt to GDP reach 117%, as forecast. The cuts caused widespread discontent and damaged his expansionist reputation.

These are not agencies that can be ignored. They influence the thinking of central banks, thinktanks and finance ministries. They dominate the economic debate.

Starmer and Reeves know that if any progress is to be made, it must be by stealth.

The rationalists will howl with dismay at such a strategy, but the English have only rarely embraced what we might call a help-thy-neighbour welfarism in preference to the John Bull spirit of the 19th century.

We can point to the aftermath of the second world war as a period when Labour was bold, but the circumstances were radically different. We can refer to our neighbour’s higher taxes and nationalised industries, but France’s statist policies cannot easily be replicated.

Neither can the regional apparatus and local banks that support the German economy. For one thing, Germany has been a collection of regional entities for centuries, defined through struggle and by arbitrary county lines drawn by civil servants, as in the UK.

Then we need to ask: would the state do a better job of running the water companies, the railways and the energy companies? If you think so, what is your evidence?

Britain’s state authorities cannot all be labelled ramshackle, but many have become rundown after more than a decade of austerity. The people running them are shellshocked and have become decision-phobic.

The HS2 high speed train line between London, Birmingham and Manchester didn’t founder because engineering costs rocketed. That was a symptom of a state that couldn’t make up its mind what it wanted from the initial £38bn investment and that indecision helped push the bill far higher.

Councils have made huge mistakes that cannot be explained by a lack of funding. Voters in Nottingham know what happened when the local authority tried its hand at selling electricity and gas. The company went bust, leaving behind a multimillion-pound bill for local council tax payers.

Labour plans to be circumspect about how quickly it ramps up investments when it kickstarts the British energy scheme, and rightly so. Reeves and Starmer know the financial and institutional constraints ahead of them. They will need skill and guile to guide the ship of state, tacking this way and that to reach their destination.