Budget 2024: ‘How Labour can fix the worst economic inheritance since 1945’

Winning the last election means we have the chance to start rebuilding this nation’s prosperity after fourteen years of Conservative failure.

We have inherited the worst economic conditions since 1945. Fourteen years of cuts in investment left us with an historic fall in wages, the highest energy bills & inflation in the G7, and almost 3 million out of work due to sickness. Winning on July 4th means we get the chance to fix all this.

We can fix our economy by investing to rebuild our prosperity. When we were last in government, we invested in our public services, physical infrastructure, and skills. The result was each of us producing more year-on-year a.k.a. economic growth. Real wages increased by over a third as we invested in our workers, carbon emissions fell as we invested in clean energy, and waiting lists fell as we invested in our NHS. 

In stark contrast, the past fourteen years were characterised by stagnation and then decline. The list of what we need to fix is very, very long. Below I set out (just) three of the major economic problems we face and how this Labour government can fix them.

Problem 1: Worst wage squeeze in 200 years 

The previous government’s decisions led to historic cuts in investment. Less investment led to a no-growth economy where each of us stopped producing more. Wages first stopped growing and then started falling. The squeeze in wages was unprecedented – the worst since Napoleon threatened our shores.

The Conservatives directly cut public investment (austerity) and indirectly cut private sector investment too. The private sector invested less as the last government created instability and lowered returns to investment by, for example, cutting skills funding.

Fixing It: Ending austerity will mean a very welcome increase in public investment. Private investment will rise when, firstly, we create the basic stability businesses need to invest and, secondly, when we rebuild our skills and infrastructure so each of us can produce more.

Problem 2: Highest energy prices and inflation in the G7

The last government’s cut and then blocked green investment. David Cameron’s decision to “cut the green crap” led to declines in home insulation and the blocking of onshore wind farms. This left us dependent on natural gas. Natural gas is more expensive than clean energy in any case. But Putin’s invasion of Ukraine caused the price of natural gas to skyrocket even higher, which then left us with the highest energy prices and inflation in the G7. 

Fixing It: Investing in our own clean energy and insulation through GB Energy and our Warm Homes Plan will lead to lower energy bills. Home-grown clean energy is also more secure than fossil fuels supplied by foreign dictators. Solar and wind are 50 to 75% cheaper than natural gas. This is likely to fall even further in the coming years. 

Problem 3: Three million too sick to work

Almost three million are too sick to work because the last government broke our NHS. They left us with the longest waiting times in history, which means we were the only OECD nation to continue to see long-term sickness rise after COVID. A functioning health service is not an optional extra, it is serious economic infrastructure that the Conservatives decimated.

Fixing It: Rebuilding and reforming our NHS will help us all be healthier – and a healthier nation is one that produces more. We need to rebuild our NHS by hiring more doctors and nurses and we need to reform it too.

To stop chronic health conditions like heart disease becoming more common and costly, we need to invest in prevention rather than cure, and we need to prioritise funding for GPs rather than hospitals. That is the whole essence of the Darzi report that we will implement.

‘Building economic strength from the rubble’

We can meet the economic challenges we face and create a nation where each of is better off. Previous Labour governments have built economic strength from rubble.

As Attlee once built the welfare state and laid the foundations for Thirty Glorious Years of growth, so too can this Labour government. We can raise public and private investment, build clean energy, and rebuild our healthcare system so that each of us can be more prosperous in the years to come.

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