Labour's economic tightrope: Treading challenges post-landslide win
The Labour Party, aware of public finance constraints, endeavoured to temper social expectations before the elections. However, Professor Iain Begg, an economist from the London School of Economics, stated that the new government has some capacity to meet these without increasing debt.
Thursday's general election in Great Britain gave the Labour Party a substantial majority in the House of Commons, where they will hold 411 out of 650 seats. However, the social expectations of Keir Starmer's government are equally high, especially regarding the cost of living. The pressure on public finances implies that these expectations cannot be met quickly and efficiently. Consequently, voters may soon become disillusioned with the Labour Party, mainly since – as political scientists highlight – the British electorate is becoming less loyal to the principal parties and is more willing to consider alternatives to Labour and the Conservatives.
Can the government meet expectations without increasing debt?
In conversation with PAP, Prof. Begg concurred that support for the Labour Party is broad but shallow, emphasising that an additional challenge is their 14 years of opposition. After such a long time out of power, it takes time for them to reacquaint themselves with the mechanisms of governance.
- The Labour Party is facing not so much a crisis in public finance but limitations within it. They cannot rely on increased spending to solve all the problems they aim to address. Can they meet expectations? Well, they have been cautious not to raise too many expectations. Begg said it was wise to acknowledge the limits of public finances while committing to do everything possible within those constraints to grow the economy.
He believes that to improve the situation relatively quickly without significant financial outlay, the Labour Party government will likely focus on reforming two areas that have long been seen as impediments to economic growth.
Challenges for the new government
- The first of these is health care. The British public health service primarily focuses on treatment rather than prevention. If the Labour Party pledges to allocate resources more towards prevention, it should, in turn, reduce the burden on treatment services. Thus, he explained that it exemplifies changing the delivery of public services rather than increasing spending on them.
He noted that construction and infrastructure are the second vital areas that require reform and can be addressed without substantial expenditure. The problem in Great Britain is the deficient number of houses being built, partly due to a restrictive planning system. He said that simplifying the planning system should lead to an increase in house building, stimulating the economy without heavily relying on public funds.
- The same principle applies to infrastructure. One example is the proposed new crossing over the Thames in eastern London, where numerous investigations into building permits have generated 300,000 pages of documents, but not a single shovel has hit the ground. The overly stringent planning system stifling development is one of the British economy's most significant failures, assessed by Professor Begg.
