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Labor is spreading the biggest lie in British politics

Now safely ensconced in the Treasury, Reeves picks up where the campaign left off. In her first speech as chancellor earlier this week, she claimed she had inherited the “worst circumstances since the Second World War”, and warned that she had ordered “financial officials to provide an assessment of the state of our spending legacy so that I can understand the extent of the challenge”.

This is obviously nonsense. As Institute for Fiscal Studies director Paul Johnson pointed out last month, the government’s books are “wide open, completely transparent”. Everyone – you, me and certainly the bond markets – can see exactly what’s happening at any given time. It would be a very brave lender to choose to finance Britain’s debt if this were not the case.

Equally nonsensical is the idea that this is the worst financial legacy in 79 years and counting of British economic history. You don’t have to look back to World War II to find a more challenging set of circumstances for an incoming government. You don’t even have to look back to the last millennium.

The deficit is currently around 4.5 percent of GDP. In 2010, the coalition government took over a country with a deficit that was more than twice as high at a whopping 10.3 percent. It took years of work to bring it back under control.

However, the deficit inherited by Labor will already be significantly reduced. By 2028-29, the Office for Budget Responsibility estimates it will be about 1.2 percent of GDP. Part of this fall is based on spending assumptions that are, charitably, challenging to meet.

But just over 1.5 percentage points come from increased revenues and interest rate falls which, in the absence of further bad news, have largely been baked in. Many of the difficult decisions regarding tax increases and frozen thresholds have already been taken.

It is true that the debt burden is greater than it was in 2010 and is slightly below 100 percent of GDP. But it’s worth remembering that much of this increase was the result of pandemic measures enthusiastically supported by the Labor Party, which called for extensions to the leave scheme and bigger pay rises for NHS ‘heroes’.

It is also true that the Labor Party themselves had overseen a rise in debt to 65 per cent of GDP in 2010 from a starting point of 38 per cent, without the excuse of putting the economy into deep freeze for a year.

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