Treasury orthodoxy isn’t the answer
26 March 2025, Chancellor Rachel Reeves leaves 11 Downing Street to deliver her Spring Statement (Credit: Li Ying/Xinhua/Alamy Live News)
4 min read
Our Osbornian overlord has spoken, and we must comply. That was the clear impression from the tweaks we saw at the Spring Statement.
On the one hand, the government is absolutely right to prioritise getting more people into work and off benefits. On the other, changing the precise policy details at short notice to satisfy the requirements of our self-imposed fiscal targets, as judged by the OBR, is more questionable.
This tinkering makes one consider a more overarching question: have we, as a country, grasped the enormity of the geopolitical crisis we are facing and the implications for our economic policy? Vladimir Putin’s invasion of Ukraine in 2022 and the return of an increasingly unpredictable and protectionist Donald Trump have revealed just how economically and militarily exposed we are. The supposed inevitability of ever-greater globalisation has proven a dangerous fiction, and it is now in sharp reverse.
The common establishment refrain is that ‘there is no money’ or that the ‘the country is broke’. Well, is it?
Our route here barely needs rehearsing. As former Conservative prime minister Harold Macmillan famously said, we sold off the family silver – and indeed we have continued to do so. Our critical industries and public services were hived off to generate private profit at the expense of the public good. Manufacturing was offshored because the future was the ‘knowledge economy’, and thus we created more and more universities, pumping out degrees of dubious quality. We dispensed with much vocational education, thus running down our skills base in key sectors like construction and engineering. Large-scale migration followed, often to fill gaps which could be filled with British workers, if only they were trained here.
The government’s commitment to developing an industrial strategy is welcome, because a left-wing government should very actively seek to build an economy that is fairer and makes ordinary people better off. Skills, skills, skills must be at its heart, and this is where defence, among other sectors, can be so powerful, because it covers the full range of jobs from hi-tech development to factory-based production. It is uncomfortable for us on the left to consider defence as a route to prosperity, but few things should be as economically galvanising as a belligerent Russia and a disappearing US security guarantee, leaving the future of democratic Europe at stake.
This will, of course, require upfront investment, at a time when the common establishment refrain is that “there is no money” or that the “the country is broke”. Well, is it? The public finances may be less than healthy, but we remain one of the richest countries in the world, even if ordinary people do not enjoy the fruits. The government’s modest revenue-raising measures on the wealthiest are welcome, but are we really saying that we have reached the revenue maximising peak of the Laffer curve across the economy? This is a plainly absurd argument.
We could start by taxing enormous property wealth fairly, scrapping the incredibly regressive council tax, which punishes those living in poorer areas, while leaving tax remarkably low for the very wealthiest property owners. Everyone with a basic understanding of our tax system knows that this is ridiculous, and indeed it is becoming more unsustainable with every passing year as councils shoulder the burden of our increasing social care needs.
Whatever we think of the phrase ‘levelling-up’ and the lack of any tangible delivery, regional inequality in this country is stark. This moment provides an opportunity to bridge the gap, with serious investment in skills and jobs outside London and the South East, which have never truly recovered from deindustrialisation, but Treasury orthodoxy gives us the “Oxford-Cambridge growth corridor” and Heathrow expansion. They were hardly dancing in the streets of Pendle and Clitheroe upon hearing these policies announced.
One should never let a crisis go to waste. The situation is grave, but this moment provides the opportunity to secure our country’s national and economic security, while building a fairer, more balanced economy, which makes ordinary people better-off.
Jonathan Hinder is Labour MP for Pendle and Clitheroe
