Labour will not “turn on the spending taps” if it wins the next election, Keir Starmer will say on Monday, bolstering the view of some senior Labour MPs that he is preparing to sign up to austerity-style public sector cuts.
The Labour leader will use a speech on the economy to warn that Britain is in its worst economic state in more than half a century and lay the ground for what shadow ministers expect to be extremely tight spending constraints after the general election.
The speech marks the first time Starmer has spoken publicly about the long-term path of public sector spending since last month’s autumn statement, which put the UK on course for another round of sweeping public sector cuts after the election.
In a speech to the Resolution Foundation, he will say: “Anyone who expects an incoming Labour government to quickly turn on the spending taps is going to be disappointed … It’s already clear that the decisions the government are taking, not to mention their record over the past 13 years, will constrain what a future Labour government can do.”
He will add: “This parliament is on track to be the first in modern history where living standards in this country have actually contracted. Household income growth is down by 3.1% and Britain is worse off.
“This isn’t living standards rising too slowly or unequal concentrations of wealth and opportunity. This is Britain going backwards. This is worse than the 1970s, worse than the recessions of the 1980s and 1990s, and worse even than the great crash of 2008.”
Preparing for an election at some point next year, Starmer will make clear that times are much worse now than they were in 2010 when the Conservative and Lib Dem coalition government instigated their austerity measures: “Never before has a British government asked its people to pay so much, for so little.”
Rachel Reeves, the shadow chancellor, has previously said that Labour will not go into the next election promising unfunded departmental spending pledges or tax rises beyond those they have already set out. These two pledges have limited how much room the party has to promise to lift government spending in an effort to relieve the pressure on Britain’s stretched public services.
The constraints facing the next government became even more acute after last month’s autumn statement, when the chancellor, Jeremy Hunt, announced £20bn worth of tax cuts, paid for in part by future public spending cuts on a par with those carried out by David Cameron’s government.
Under projections set out by the Office for Budget Responsibility, unprotected departments will see their budgets fall by 4.1% every year over the next parliament. Torsten Bell, chief executive of the Resolution Foundation, called the projected spending cuts “implausibly large”.
Starmer and Reeves have not yet decided whether they will match the Tory spending plans for at least the first few years of a Labour government, as Tony Blair and Gordon Brown did going into the 1997 election.
Nevertheless, many shadow ministers expect that he and Reeves will choose to stick to the forecast spending limits, though they hope that any additional growth will be used to pay for public spending rather than tax cuts.
Some say they are prepared to accept the cuts to come, but that Labour must in turn stand by its pledge to spend more on capital projects under the £28bn green prosperity plan, which has already been watered down.
“We can do the departmental cuts as long as we can invest money in things like dilapidated schools, hospitals and roads,” said one.
Starmer will say on Monday that Labour will prioritise growth with a series of policies including planning reform, competitive business taxes and stronger labour protections.
“The defining purpose of the next Labour government, the mission that stands above all others, will be raising Britain’s productivity growth,” he will say. “[It is] a goal that for my Labour party is now an obsession. That’s a big change for us. Having wealth creation as our number one priority, that’s not always been the Labour party’s comfort zone.”
Some, however, warn that sticking to Tory spending plans will itself be a major drag on economic output. Bell said after the autumn statement that it was “hard to think of a more anti-growth policy” than the projected public-sector pay cuts.
A decision to match the Conservatives’ spending plans is also likely to create further friction between the Labour leadership and the party’s grassroots. Many MPs and members are already angry about Starmer’s refusal to call for a ceasefire in Gaza, and were further irritated by his praise for the former Tory prime minister Margaret Thatcher over the weekend.
The Labour leader picked Thatcher as one of three former prime ministers he wanted to emulate if he became prime minister, alongside his Labour predecessors Tony Blair and Clement Attlee. All three, he said, had a drive and sense of purpose that defined their premiership.
Starmer told BBC Radio 4’s Broadcasting House on Sunday: “Thatcher did have a plan for entrepreneurialism; [she] had a mission. It doesn’t mean I agree with what she did, but I don’t think anybody could suggest that she didn’t have a driving sense of purpose.”
In a piece for the Sunday Telegraph, he said: “Every moment of meaningful change in modern British politics begins with the realisation that politics must act in service of the British people, rather than dictating to them. Margaret Thatcher sought to drag Britain out of its stupor by setting loose our natural entrepreneurialism.”
Starmer admitted that part of the reason for his comments was to woo wavering Tory voters, as polls show that many people have still to make up their mind how they will vote at the next election.
