We now have the definitive proof Labour has crashed our economy

Telegraph

4 days ago

It is too optimistic about the revenues extra tax will raise. It overestimated the positive impact of low-skilled immigration on growth. And it is far too reliant on a static economic model that takes little account of entrepreneurship or incentives. There are plenty of valid criticisms that can be made of the Office for Budget Responsibility.
And yet, in fairness, it occasionally gets something absolutely right. In its warning today that the UK is only one shock away from a catastrophic debt crisis the OBR is completely spot on – and, even worse, the Chancellor Rachel Reeves has left herself so little fiscal space, and her backbenchers are so out of control, that a market meltdown is now inevitable.
The latest OBR report makes for sobering reading for anyone concerned about the state of Britain's public finances. In its fiscal risks and sustainability report, it lays out in clear statistics and charts just how desperate the position has become. After the financial crisis, and the pandemic, along with wild spending by both this and the last government, the UK now has 'the sixth-highest debt, fifth-highest deficit, and third-highest borrowing costs among 36 advanced economies.'
We face huge pressure on spending, from the costs of net zero, to the rising welfare bill, and soaring pension costs, while at the same time a stagnant economy means the UK is failing to generate the tax revenues needed to keep the books balanced. Debt is on track to hit an overwhelming 270 per cent of GDP by the 2070s, it warns, a total that puts us in 'a very vulnerable position', with a 'substantial erosion of the UK's capacity to respond to future shocks.'
It is little wonder that Rachel Reeves was reduced to tears in the House of Commons last week. Against that dire backdrop, a responsible Chancellor would be reforming welfare: scaling by the triple lock on pensions (a double lock would probably be fine); trimming the costs of net zero; and finding ways of boosting growth. With a decade or two of hard work it might be just about possible to get the nation's finances back in order. Instead, the most minor of welfare reforms have been scrapped, and spending is now rising again. The result? It will only take a single shock to push the country over the edge, and for investors to start refusing to finance the extravagance of the British state.
The Chancellor only has one option left. Crossing her fingers and hoping for the best. And yet, history suggests that won't be good enough. A financial shock of one sort or another rolls around every ten or fifteen years. By now, we are probably overdue for a crisis. Sure, we can't know yet when or where it might erupt. But there is no shortage of possible candidates. President Trump is gambling with the dollar with his deficit spending.
France's budget is out of control, and the country faces political deadlock, and for a country at the heart of the euro to run out of cash would pose a threat to the stability of the single currency, and a far worse one than the Greek debt crisis. And of course, the UK may well be the country that triggers a global market meltdown, just as we almost did during the short Premiership of Liz Truss. One point is surely clear. When it happens, Britain will be right in the centre of the storm – and the Starmer administration is doing absolutely nothing to build up any buffer against it.