Steering the British economy out of the mess Labour inherited is a slow and painful process, beset by economic and political hazards. Four Labour governments since the Second World War were derailed by financial crises – in 1949, 1967, 1976 and 2008 – and two Tory governments by crises in 1992 and 2022. Yet, in 2025, Britain is arguably economically more vulnerable than in any of those years. The task for the chancellor is to climb out of this deep pit with as much determination as possible while not risking a sterling or bond sell-off that would derail the government, party and country at least as severely as any of those earlier crises.
Thus the much-criticised fiscal rules. These are not a self-imposed straitjacket to be abandoned at will but an attempted firewall to sustain financial market confidence while allowing scope to maintain and increase public investment. The promise to balance day-to-day public spending five years hence with day-to-day tax receipts is a minimum guarantor of fiscal credibility. But meeting this permits a second rule: to allow the state to borrow to maintain and increase capital spending, so protecting public investment from being raided as the soft option when the public budget comes under pressure – as every chancellor has done for more than 50 years, with results we live with daily.
