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Starmer wants to go for growth – but will he end up like Liz Truss?

(Photo: Getty)

Keir Starmer, it turns out, was a secret Liz Truss fan all along. Launching his party’s manifesto this morning he is going to tell us that growth will be the overriding preoccupation of his government. That, if you remember, is what the Truss premiership was going to be all about: ‘growth, growth, growth.’

How is he going to generate growth, and in a way that doesn’t have him landing flat on his face like Truss herself?

Starmer has decided that he is going to take the levellers and the greens head-on. ‘Some people say that how you grow the economy is not a central question – that it’s not about how you create wealth but how you tax it, how you spend it, how you slice the cake, that’s all that matters. This manifesto is a total rejection of that argument.’

In other words: no, we are not going to obsess about issues of equality. The first thing is to ensure that there is a big enough national cake – only then do you start to worry that everyone is getting a fair slice. Starmer isn’t quite advocating trickle-down economics – the belief that if you make society rich enough some of that wealth is bound to filter down to every level – but it does mark him apart from many in the Labour party, and certainly in the Green party, who aren’t really much bothered about economic growth at all. 

But if Starmer is right to diagnose a lack of growth as being at the heart of Britain’s current problems, the rather important question remains: how is he going to generate growth, and in a way that doesn’t have him landing flat on his face like Truss herself? 

He will, apparently, reassure business that corporation tax will not rise above 25 per cent over the next five years – baking in a promise to match that on income tax, national insurance and VAT. There will be a National Wealth Fund to ‘invest in the industries for the future’, by which Labour seems to mean green industries. That is all very well, except it does raise the spectre of his government trying to ‘pick winners’ – something which governments in the past have proved to be rather poor at. 

Countries which have successful sovereign wealth funds, like Qatar, Norway or Singapore have tended to be rather hard-headed in scouring the world for the best returns. Try to use your investments to promote your own country’s industries, on the other hand, and you are compromising your returns – unless you really have come to the conclusion that UK companies offer the best prospects for growth. Moreover, if you take Norway’s sovereign wealth fund, it was founded on large windfalls from the North Sea. Those, sadly, are mostly behind us now – and will be even further behind us if Starmer does as he says and stops all new licences for oil and gas extraction. Starmer will start with precious little national wealth to invest. A UK national wealth fund will have to be based on borrowed money – and as Truss proved there is limited capacity for Britain to borrow on global markets.

Starmer is promising to ‘restore economic stability with tough new spending rules’. Fair enough, except that when Cameron and Osborne promised the same Labour damned it as ‘austerity’. Labour is also promising to reform planning rules to build ‘railways, roads, labs and 1.5 million homes’. Exactly how, we will have to wait to find out – but significant relaxation, especially on road-building, will not please the greener members of his party. The above list is interesting because it mentions laboratories but omits factories. Does Starmer not see a future in UK manufacturing? It is hard to see much heavy manufacturing surviving Labour’s green energy policy – or the Conservatives’, for that matter.

As for another of the current brakes on economic growth – the rising number of people who are economically inactive – Labour is promising a new deal to ‘make work pay’, more childcare and to ‘tackle health and mental health challenges to get people back work’. But how? Cameron and Osborne started with the best of intentions to make work pay, which is what Universal Credit was all about, yet we still ended up – after the pandemic – with record numbers of people apparently too sick to work. Labour will have to have some pretty good ideas to turn it around.