Louise Haigh’s economic plan would hasten Britain’s decline

The government is on the brink of collapse, ministers are openly fighting for the succession, and the bond vigilantes are already driving up the cost of Britain’s vast debts. Still, never mind. The soft-left Tribune group, which is likely to play a crucial role in any contest for the leadership of the Labour party, has helpfully today published a ‘plan’ to get us out of the mess. There is just one snag: it would most probably bankrupt the country and trigger a full-blown financial crisis. 

Will we find out in the next few days, or even hours, whether Sir Keir Starmer can cling on to power? How likely is he to set out a timetable for his departure? Or face a leadership challenge over the summer? Whatever happens, the battle for the future shape of the government has already begun.

The Tribune group has today set out its stall with a series of essays designed to ‘offer more than managed decline’. What’s the big idea? According to group’s chair, former minister Louise Haigh, Rachel Reeves’s fiscal rules should be replaced with a target to lower the national debt over ten years instead of five to allow for more ‘investment’. They also favour higher property taxes, a wealth tax, and shifting the power to set budgets from the Treasury to No. 10. Meanwhile, the MP Yuan Yang, who, as a former journalist for the Financial Times, is considered a balance-sheet whizz within Labour circles, is arguing for free bus passes, along with more generous treats for benefits claimants. In effect, what they seem to be saying is: the country needs more debt, higher spending, and yet more welfare.

The trouble is, it is very hard to see how that will work. British taxes have already reached a 70 year high. Given that the economy has stagnated, they will most likely have to go up again in the autumn. There is very little evidence that property or wealth taxes will raise anything like the money the Tribune group thinks it will. Indeed, only last week we learnt that the mansion tax announced by Rachel Reeves last autumn is likely to cost almost £400 million before it has even kicked in – and may well end up costing more than it collects.

As for relaxing the ‘fiscal rules’, the Tribunites are kidding themselves if they think the bond markets won’t see straight through that. Global investors already thought that the Treasury’s plan to balance the books by the end of this decade was a joke. It is very hard to see how postponing the target until the mid-2030s will reassure anyone. 

Bond yields have already spiked up on the chaos in the Labour party, with the yield on 30-year debt hitting a 28-year high. The Tribune plan might give the leadership contenders something to campaign on over the summer. But if any of them are crazy enough to try and implement it, the plan is very likely to fall apart quickly – and with that, risk bankrupting the UK.