UK
Did The Tories Really Leave Labour A 'Shocking' Inheritance?OF COURSE THEY DID
TAX CUTS = DEFICITS
Kate Nicholson
Fri, 26 July 2024
PM Keir Starmer has regularly slammed the legacy of Rishi Sunak's government in the last three weeks since he got into office. via Associated Press
Labour have wasted no time in pinning all of the countries’ problems on the Tories.
It’s not exactly a new political tactic – see the Conservatives’ ongoing claim Labour told them there was “no money left” when they took over in 2010 – but it is one they seem to be laying on rather thick so far.
Since getting the keys to No.10, the government has, almost without fail, blamed every major issue on the Tories.
In fact, Keir Starmer said on Thursday the last government “left us the worst inheritance since the Second World War”.
He added: “Every day we are finding more mess they’ve left for us to clear up.”
The prime minister also tried to buy his government some time, saying: “We’ve started the rebuilding but the problems that have been left to fester for years, cannot be fixed overnight.”
His health secretary, Wes Streeting, said their legacy was “shocking”.
Obviously the Conservatives have not taken to this lying down.
Tory leadership hopeful, Mel Stride, on Friday dismissed any such claims against his party, saying: “This is all pitch rolling, smoke and mirrors, to suggest that they’ve come in and it’s far, far worse than they ever could possibly have imagined. ”
So, just how bad is it? Let’s take a step-back from the political spin and a look at some of the cold, hard facts around some of Labour’s most eye-catching claims from recent weeks.
NHS
Streeting ordered an independent investigation into the state of the NHS a week after getting office.
On Friday, he revealed some of the early findings, all of which were pretty damning.
It found the Care Quality Commission, which is responsible for inspecting NHS hospitals, GP surgeries and care homes in England, is not fit for purpose.
Inspectors were found to be lacking experience, with some having never been in a hospital before or met a person with dementia.
Its inspections backlog is so large that a fifth of services had never been given a rating – and one NHS hospital has not had an inspection for a decade.
Meanwhile, the independent public spending watchdog, the National Audit Office (NAO) found the “scale of challenge facing the NHS today and foreseeable in the years ahead is unprecedented”.
It found a growing number of NHS bodies “have been unable to break even” with the amount of funding they’ve received, and the “pace of change” has been slow.
The authors of the NAO report said: “We are concerned that the NHS may be working at the limits of a system which might break before it is again able to provide patients with care that meets standards for timeliness and accessibility.”
It suggested policymakers must explain the potential mismatch between demand and funding, adding the NHS would need a larger budget or service levels would “deteriorate further”.
via Associated Press
Economy
The full extent of the economic inheritance will be revealed in full by chancellor Rachel Reeves on Monday.
She is expected to reveal a “black hole” in the government finances worth tens of billions of pounds – possibly exceeding £20bn per year.
She already told the BBC last weekend: “I don’t think anyone realised quite how bad things were.”
While we wait for her report, the think tank, the Institute for Fiscal Studies, looked into the Tories’ economic legacy – and found it rather wanting.
It said the last 14 years have been “extraordinary” – with earnings growing at their slowest rate in more than 200 years, and interest rates at a historic low.
“The period from 2010 to 2019 saw the biggest and most sustained cuts to public spending since World War 2,” the report said, adding that this all benefited the older generations.
The last five years have been a particularly lethal combination, due to the uncertainty of Brexit, the Covid pandemic and borrowing “on a scale even greater than seen during the financial crisis”, all of which meant taxes rose by more during the last five years than in any parliament since at least 1945.
“The legacy for the next government will be a difficult one,” the IFS said. “Expected economic growth is slow.
“The fiscal policy responses to the three shocks of the financial crisis, Covid-19 and the cost of living crisis mean that public sector debt is high, and a combination of high interest rates and low growth means that even running a primary surplus will not be enough to get it on a downward trajectory.”
It also called out the repeatedly failed promises to raise fuel duties in line with inflation, which is “another unwanted legacy” for Labour.
It predicted that the future “looks harder” for the British economy compared to its other developed countries’ economies with low productivity and high inflation.
The IFS also noted that Labour’s note to the Tories from 2010 that “there is no money left” can be applied to the current government as it “remains true today”.
The biggest and most sustained cuts to public spending since World War 2Institute for Fiscal Studies
Prisons
The new justice secretary Shabana Mahmood said last week that the UK is facing “the imminent collapse of the criminal justice system”, which sounded liek “some dystopian film”.
She said: “This is the legacy of the last Conservative government. This is the legacy of the guilty men.”
And figures released by the Ministry of Justice on Thursday showed how deep the overcrowding prison crisis is.
There were 73,804 recorded self-harm incidents in the last year, and 28,292 violent assaults in prisons over the last 12 months.
Overcrowding in prisons increased for a third year in a row, meaning 23.6% of jails now have too many inmates.
Meanwhile, the performance of four in 10 prisons are either of concern or serious concern.
Prisons have been at 99% capacity since the start of 2023, meaning prisoners have struggled to get out of their cells much.
This is all increasing reoffending rates – and worsening the risk to the public.
Interestingly, even the former Tory justice secretary Alex Chalk has backed Mahmood’s plan to reduce some offenders′ sentences to ease the overcrowding.
Lord Chancellor and justice secretary Shabana Mahmood via Associated Press
HS2
The high speed rail project was partially cancelled by Rishi Sunak, who said it had become too expensive and promised to redirect its funding.
The NAO’s latest report found that the Tories spent £592m buying land and property along parts of the route which are no longer going ahead.
Construction costs have soared by £16.1bn just since 2020, too.
It will take three more years to cancel parts of the route at an additional cost of around £100m.
The trains, which will still run between Birmingham and Manchester, will also have less space than current services – a decline of up to 17%, NAO said.
According to the NAO, the government may need to decrease demand by “incentivising people to travel at different times or to not travel by rail”, although the spending watchdog warned that this this may constrain economic growth and increase environmental costs.
Alternatively, the government was advised to try “improving or adding infrastructure” – but that may be expensive and disruptive, too.
With the economy, the NHS, HS2 and the prison system all struggling, it seems Labour may have a point – they really did inherit quite the legacy.
But now they’re in power, they can only blame the Conservatives for so long until the public get bored. The real question now is, how will they fix it?
Related...
Eight charts that lay bare Labour’s spending inheritance from Tories
Richard Partington and Phillip Inman
Fri, 26 July 2024
Rachel Reeves and her predecessor Jeremy Hunt at the state opening of parliament. On Monday she will unveil the audit to MPs.Photograph: Ian Vogler/Reuters
Rachel Reeves is preparing to announce Treasury analysis of Labour’s spending inheritance from the Conservatives in parliament on Monday to highlight why she will need to make “tough decisions” in her autumn budget.
The chancellor’s audit is expected to show £20bn in commitments left unaccounted for by the previous government, building on a narrative that the Tories have left Labour with the “worst set of circumstances since the second world war”.
After more than a decade of stalling economic growth, and with public services stretched thin, there is plenty of evidence to back up Reeves’s argument. However, there are also signs that some progress was being made before Keir Starmer’s landslide victory this month. Here are eight charts that lay out the economic legacy the new administration faces.
Soaring national debt
Reeves will be painfully aware of the damage George Osborne inflicted on Labour the last time her party left office, epitomised by the way David Cameron’s chancellor seized on the infamous Treasury note left by Liam Byrne, joking that “there is no money left”.Interactive
Without such a powerful device this time, Labour will be keen to highlight official figures showing a tougher picture than in 2010.
The national debt has risen from 64.7% of GDP in 2010 to 99.5%, the highest level since the 1960s, after successive annual budget deficits and the damage of the Covid pandemic. Debt interest costs reached a postwar high of 4.4% of GDP in 2022-23, although are now falling back as inflation cools.
UK government bond yields – a proxy for borrowing costs – have also been on a rollercoaster, soaring after Liz Truss’s mini-budget in September 2022, falling back after Rishi Sunak took over but rising again in 2023. They have eased in recent weeks but remain higher than in 2010, amid predictions that rock-bottom rates seen after the 2008 financial crisis are unlikely to return.
Falling living standards
If one chart illustrates how the UK’s situation over the last five years can be likened to the period after the second world war, it is a look back at the ups and downs of disposable incomes in each parliament.Interactive
There was a fall of 0.1% in the period from 2019 to 2024 in household incomes when taking inflation into account. To find another five-year period when real household incomes fell means going back to the Labour government of 1945-50 headed by Clement Attlee.
Then, like now, the government was also increasing defence, health, education and infrastructure spending while trying to bring down borrowing from historically high, although not unprecedented, levels.
Recovering economic growth
Since the 2008 financial crisis, growth in UK GDP has slowed. Treasury analysis requested by Reeves shows that, had the British economy grown at the Organisation for Economic Co-operation and Development average over the past 13 years, it would have been more than £140bn larger.Interactive
However, in recent months there have been more encouraging signs. The UK exited last year’s brief recession in the first quarter at a faster pace than many forecasters predicted. Gross domestic product (GDP) rose by 0.7%, more than double the rate in the eurozone and above the G7 average.
Business surveys show robust growth has been maintained, in contrast to France and Germany, where political uncertainty and global trade headwinds are weighing on activity. The pound has gained on the international money markets and the FTSE 100 is close to a record high.
Cooling inflation
After reaching the highest level since the early 1980s, 11.1% in October 2022 after the Russian invasion of Ukraine, inflation has fallen in recent months to the 2% government target.Interactive
However, prices are significantly higher than three years ago and still rising. Labour also argues that insufficient action to decarbonise Britain’s energy supply and insulate homes left households more exposed to the cost of living crisis.
Still, cooling inflation is expected to lead the Bank of England to cut interest rates, possibly as soon as Thursday next week, easing the pressure on households and businesses after 14 consecutive increases, from 0.1% in December 2021 to the current level of 5.25%.
Tax constraints
Reeves has criticised the Tories for leaving office with “working people facing the highest tax burden in 70 years”. Tax as a share of GDP is forecast to rise from 36% of GDP to 37.1% by 2028-29. That would be four points higher than pre-pandemic and the highest level since 1948.Interactive
Despite these high tax levels, public services are struggling, and could face cuts should the chancellor stick with self-imposed fiscal rules requiring the national debt to be falling as a share of GDP in the fifth year of forecasts.
Labour’s manifesto pledged not to raise income tax, national insurance or VAT, which account for the bulk of overall taxation, hemming in the new government. Reeves could, though, tweak the fiscal rules, or raise more from taxation – most likely by targeting capital gains and inheritance taxes.
Employment challenge
The proportion of people in employment across the UK has declined over the past five years, mainly in response to an acceleration in the number of people opting for early retirement and a rise in the number too sick to work.Interactive
It is a trend that other G7 countries have managed to buck. In France there has been a significant rise since the coronavirus pandemic in the number of people in employment as a proportion of all working-age people, albeit from a lower level than the UK.
Investment challenge
Investment in the UK has trailed other G7 countries for decades, hindering productivity growth and leaving key infrastructure increasingly inadequate for a modern advanced economy.Interactive
Public investment has jumped in recent times from an average of 1.8% of national income to 2.4% since 2021, but the last Tory chancellor, Jeremy Hunt, paid for his pre-election cuts to national insurance with a dramatic reduction over the next five years that Labour is struggling to reinstate.
The level of investment by businesses has also been low for decades. Huge injections of foreign direct investment mostly went into buying UK companies rather than building new factories. Brexit added a layer of uncertainty, deterring foreign companies from basing themselves in the UK and discouraging businesses from investing to spur exports.
Councils in crisis
More English councils have declared effective bankruptcy in the past three years than the preceding 30, with casualties including Birmingham, Nottingham, Thurrock and Woking.Interactive
Sky-high inflation and rising demand on services have played a role, as have missteps at some authorities. However, local government bore the brunt of the Tories’ 2010s austerity drive, with central government grants cut by 40% in real terms in the decade up to 2020. The Institute for Government estimates that local authority budgets would need to increase by £7.1bn to bring funding back to the level in 2010.
Among the biggest challenges include a £5bn debt crisis in funding for special educational needs, which has been kept off municipal balance sheets by a special “override” arrangement with central government.
Kate Nicholson
Fri, 26 July 2024
PM Keir Starmer has regularly slammed the legacy of Rishi Sunak's government in the last three weeks since he got into office. via Associated Press
Labour have wasted no time in pinning all of the countries’ problems on the Tories.
It’s not exactly a new political tactic – see the Conservatives’ ongoing claim Labour told them there was “no money left” when they took over in 2010 – but it is one they seem to be laying on rather thick so far.
Since getting the keys to No.10, the government has, almost without fail, blamed every major issue on the Tories.
In fact, Keir Starmer said on Thursday the last government “left us the worst inheritance since the Second World War”.
He added: “Every day we are finding more mess they’ve left for us to clear up.”
The prime minister also tried to buy his government some time, saying: “We’ve started the rebuilding but the problems that have been left to fester for years, cannot be fixed overnight.”
His health secretary, Wes Streeting, said their legacy was “shocking”.
Obviously the Conservatives have not taken to this lying down.
Tory leadership hopeful, Mel Stride, on Friday dismissed any such claims against his party, saying: “This is all pitch rolling, smoke and mirrors, to suggest that they’ve come in and it’s far, far worse than they ever could possibly have imagined. ”
So, just how bad is it? Let’s take a step-back from the political spin and a look at some of the cold, hard facts around some of Labour’s most eye-catching claims from recent weeks.
NHS
Streeting ordered an independent investigation into the state of the NHS a week after getting office.
On Friday, he revealed some of the early findings, all of which were pretty damning.
It found the Care Quality Commission, which is responsible for inspecting NHS hospitals, GP surgeries and care homes in England, is not fit for purpose.
Inspectors were found to be lacking experience, with some having never been in a hospital before or met a person with dementia.
Its inspections backlog is so large that a fifth of services had never been given a rating – and one NHS hospital has not had an inspection for a decade.
Meanwhile, the independent public spending watchdog, the National Audit Office (NAO) found the “scale of challenge facing the NHS today and foreseeable in the years ahead is unprecedented”.
It found a growing number of NHS bodies “have been unable to break even” with the amount of funding they’ve received, and the “pace of change” has been slow.
The authors of the NAO report said: “We are concerned that the NHS may be working at the limits of a system which might break before it is again able to provide patients with care that meets standards for timeliness and accessibility.”
It suggested policymakers must explain the potential mismatch between demand and funding, adding the NHS would need a larger budget or service levels would “deteriorate further”.
via Associated Press
Economy
The full extent of the economic inheritance will be revealed in full by chancellor Rachel Reeves on Monday.
She is expected to reveal a “black hole” in the government finances worth tens of billions of pounds – possibly exceeding £20bn per year.
She already told the BBC last weekend: “I don’t think anyone realised quite how bad things were.”
While we wait for her report, the think tank, the Institute for Fiscal Studies, looked into the Tories’ economic legacy – and found it rather wanting.
It said the last 14 years have been “extraordinary” – with earnings growing at their slowest rate in more than 200 years, and interest rates at a historic low.
“The period from 2010 to 2019 saw the biggest and most sustained cuts to public spending since World War 2,” the report said, adding that this all benefited the older generations.
The last five years have been a particularly lethal combination, due to the uncertainty of Brexit, the Covid pandemic and borrowing “on a scale even greater than seen during the financial crisis”, all of which meant taxes rose by more during the last five years than in any parliament since at least 1945.
“The legacy for the next government will be a difficult one,” the IFS said. “Expected economic growth is slow.
“The fiscal policy responses to the three shocks of the financial crisis, Covid-19 and the cost of living crisis mean that public sector debt is high, and a combination of high interest rates and low growth means that even running a primary surplus will not be enough to get it on a downward trajectory.”
It also called out the repeatedly failed promises to raise fuel duties in line with inflation, which is “another unwanted legacy” for Labour.
It predicted that the future “looks harder” for the British economy compared to its other developed countries’ economies with low productivity and high inflation.
The IFS also noted that Labour’s note to the Tories from 2010 that “there is no money left” can be applied to the current government as it “remains true today”.
The biggest and most sustained cuts to public spending since World War 2Institute for Fiscal Studies
Prisons
The new justice secretary Shabana Mahmood said last week that the UK is facing “the imminent collapse of the criminal justice system”, which sounded liek “some dystopian film”.
She said: “This is the legacy of the last Conservative government. This is the legacy of the guilty men.”
And figures released by the Ministry of Justice on Thursday showed how deep the overcrowding prison crisis is.
There were 73,804 recorded self-harm incidents in the last year, and 28,292 violent assaults in prisons over the last 12 months.
Overcrowding in prisons increased for a third year in a row, meaning 23.6% of jails now have too many inmates.
Meanwhile, the performance of four in 10 prisons are either of concern or serious concern.
Prisons have been at 99% capacity since the start of 2023, meaning prisoners have struggled to get out of their cells much.
This is all increasing reoffending rates – and worsening the risk to the public.
Interestingly, even the former Tory justice secretary Alex Chalk has backed Mahmood’s plan to reduce some offenders′ sentences to ease the overcrowding.
Lord Chancellor and justice secretary Shabana Mahmood via Associated Press
HS2
The high speed rail project was partially cancelled by Rishi Sunak, who said it had become too expensive and promised to redirect its funding.
The NAO’s latest report found that the Tories spent £592m buying land and property along parts of the route which are no longer going ahead.
Construction costs have soared by £16.1bn just since 2020, too.
It will take three more years to cancel parts of the route at an additional cost of around £100m.
The trains, which will still run between Birmingham and Manchester, will also have less space than current services – a decline of up to 17%, NAO said.
According to the NAO, the government may need to decrease demand by “incentivising people to travel at different times or to not travel by rail”, although the spending watchdog warned that this this may constrain economic growth and increase environmental costs.
Alternatively, the government was advised to try “improving or adding infrastructure” – but that may be expensive and disruptive, too.
With the economy, the NHS, HS2 and the prison system all struggling, it seems Labour may have a point – they really did inherit quite the legacy.
But now they’re in power, they can only blame the Conservatives for so long until the public get bored. The real question now is, how will they fix it?
Related...
Eight charts that lay bare Labour’s spending inheritance from Tories
Richard Partington and Phillip Inman
Fri, 26 July 2024
Rachel Reeves and her predecessor Jeremy Hunt at the state opening of parliament. On Monday she will unveil the audit to MPs.Photograph: Ian Vogler/Reuters
Rachel Reeves is preparing to announce Treasury analysis of Labour’s spending inheritance from the Conservatives in parliament on Monday to highlight why she will need to make “tough decisions” in her autumn budget.
The chancellor’s audit is expected to show £20bn in commitments left unaccounted for by the previous government, building on a narrative that the Tories have left Labour with the “worst set of circumstances since the second world war”.
After more than a decade of stalling economic growth, and with public services stretched thin, there is plenty of evidence to back up Reeves’s argument. However, there are also signs that some progress was being made before Keir Starmer’s landslide victory this month. Here are eight charts that lay out the economic legacy the new administration faces.
Soaring national debt
Reeves will be painfully aware of the damage George Osborne inflicted on Labour the last time her party left office, epitomised by the way David Cameron’s chancellor seized on the infamous Treasury note left by Liam Byrne, joking that “there is no money left”.Interactive
Without such a powerful device this time, Labour will be keen to highlight official figures showing a tougher picture than in 2010.
The national debt has risen from 64.7% of GDP in 2010 to 99.5%, the highest level since the 1960s, after successive annual budget deficits and the damage of the Covid pandemic. Debt interest costs reached a postwar high of 4.4% of GDP in 2022-23, although are now falling back as inflation cools.
UK government bond yields – a proxy for borrowing costs – have also been on a rollercoaster, soaring after Liz Truss’s mini-budget in September 2022, falling back after Rishi Sunak took over but rising again in 2023. They have eased in recent weeks but remain higher than in 2010, amid predictions that rock-bottom rates seen after the 2008 financial crisis are unlikely to return.
Falling living standards
If one chart illustrates how the UK’s situation over the last five years can be likened to the period after the second world war, it is a look back at the ups and downs of disposable incomes in each parliament.Interactive
There was a fall of 0.1% in the period from 2019 to 2024 in household incomes when taking inflation into account. To find another five-year period when real household incomes fell means going back to the Labour government of 1945-50 headed by Clement Attlee.
Then, like now, the government was also increasing defence, health, education and infrastructure spending while trying to bring down borrowing from historically high, although not unprecedented, levels.
Recovering economic growth
Since the 2008 financial crisis, growth in UK GDP has slowed. Treasury analysis requested by Reeves shows that, had the British economy grown at the Organisation for Economic Co-operation and Development average over the past 13 years, it would have been more than £140bn larger.Interactive
However, in recent months there have been more encouraging signs. The UK exited last year’s brief recession in the first quarter at a faster pace than many forecasters predicted. Gross domestic product (GDP) rose by 0.7%, more than double the rate in the eurozone and above the G7 average.
Business surveys show robust growth has been maintained, in contrast to France and Germany, where political uncertainty and global trade headwinds are weighing on activity. The pound has gained on the international money markets and the FTSE 100 is close to a record high.
Cooling inflation
After reaching the highest level since the early 1980s, 11.1% in October 2022 after the Russian invasion of Ukraine, inflation has fallen in recent months to the 2% government target.Interactive
However, prices are significantly higher than three years ago and still rising. Labour also argues that insufficient action to decarbonise Britain’s energy supply and insulate homes left households more exposed to the cost of living crisis.
Still, cooling inflation is expected to lead the Bank of England to cut interest rates, possibly as soon as Thursday next week, easing the pressure on households and businesses after 14 consecutive increases, from 0.1% in December 2021 to the current level of 5.25%.
Tax constraints
Reeves has criticised the Tories for leaving office with “working people facing the highest tax burden in 70 years”. Tax as a share of GDP is forecast to rise from 36% of GDP to 37.1% by 2028-29. That would be four points higher than pre-pandemic and the highest level since 1948.Interactive
Despite these high tax levels, public services are struggling, and could face cuts should the chancellor stick with self-imposed fiscal rules requiring the national debt to be falling as a share of GDP in the fifth year of forecasts.
Labour’s manifesto pledged not to raise income tax, national insurance or VAT, which account for the bulk of overall taxation, hemming in the new government. Reeves could, though, tweak the fiscal rules, or raise more from taxation – most likely by targeting capital gains and inheritance taxes.
Employment challenge
The proportion of people in employment across the UK has declined over the past five years, mainly in response to an acceleration in the number of people opting for early retirement and a rise in the number too sick to work.Interactive
It is a trend that other G7 countries have managed to buck. In France there has been a significant rise since the coronavirus pandemic in the number of people in employment as a proportion of all working-age people, albeit from a lower level than the UK.
Investment challenge
Investment in the UK has trailed other G7 countries for decades, hindering productivity growth and leaving key infrastructure increasingly inadequate for a modern advanced economy.Interactive
Public investment has jumped in recent times from an average of 1.8% of national income to 2.4% since 2021, but the last Tory chancellor, Jeremy Hunt, paid for his pre-election cuts to national insurance with a dramatic reduction over the next five years that Labour is struggling to reinstate.
The level of investment by businesses has also been low for decades. Huge injections of foreign direct investment mostly went into buying UK companies rather than building new factories. Brexit added a layer of uncertainty, deterring foreign companies from basing themselves in the UK and discouraging businesses from investing to spur exports.
Councils in crisis
More English councils have declared effective bankruptcy in the past three years than the preceding 30, with casualties including Birmingham, Nottingham, Thurrock and Woking.Interactive
Sky-high inflation and rising demand on services have played a role, as have missteps at some authorities. However, local government bore the brunt of the Tories’ 2010s austerity drive, with central government grants cut by 40% in real terms in the decade up to 2020. The Institute for Government estimates that local authority budgets would need to increase by £7.1bn to bring funding back to the level in 2010.
Among the biggest challenges include a £5bn debt crisis in funding for special educational needs, which has been kept off municipal balance sheets by a special “override” arrangement with central government.
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