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Economists Warn Labour Against Cuts to Government Investment

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Government Investment,Labour Party,Economy

Eight leading economists have written to the Financial Times warning Rachel Reeves, the shadow chancellor, that planned cuts to government investment could lead to a “vicious circle of stagnation and decline”. They argue that Labour’s “decade of national renewal” cannot succeed if investment falls further.

Rachel Reeves has been warned that she needs to “substantially increase” government investment to avoid “a vicious circle of stagnation and decline”.

That would be enough to avoid any cuts even after allowing for inflation. But if the new government wanted to go further and maintain public investment as a share of national income, it would have to find a total of £24bn in five years’ time. The thinking behind this rule is that the national debt has gone up a lot in recent years, because of the impact of the Covid and cost of living crises, and that means the country is paying more interest to service those debts. So Labour, and the Conservatives, want to show that theyThe current Conservative plans do show that – but by a tiny margin.

 

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