John Healey just crossed massive red line – even Rachel Reeves didn’t | Personal Finance | Finance
At first, I welcomed his appointment. This was a man who resigned in the national interest because Keir Starmer wasn’t spending enough on defence. Unless that was only a pretext to smooth the path for Andy Burnham. If it was, he has certainly got his reward: a plum job, replacing Rachel Reeves. Unfortunately, the early signs aren’t good. It already looks like he’s caving to the Labour left in ways even Reeves resisted. He could end up being an even bigger disaster.
The country’s finances are in a dire state. Today, we learned that British national debt has just exceeded £3trillion for the first time in history. According to the TaxPayers’ Alliance, Labour now borrows £4,270 every single second. That adds up to £369million a day. Even left-wing think tank the Resolution Foundation has suggested this is cause for alarm. It’s previously warned that our public finances are on a “deeply unsustainable path” and debt could spiral. It certainly could. Just look at this.
It took more than 300 years for our national debt to rise above £1 trillion, passing that threshold in 2010. It took just 10 years to rack up the next trillion, and now the next has taken just six years. Which makes this week’s news even more alarming. Incredibly, Healey is said to be fiddling with the fiscal rules to raise another £9 billion a year to spend on Andy Burnham’s infrastructure, housing and business pledges. Isn’t Labour spending enough already?
It certainly is. The Institute for Government calculates that policy measures introduced by Labour since the 2024 election will cost us between £70billion to £80billion a year in extra spending by the end of the decade. And it still isn’t enough! Healey has only just entered Number 11 and already wants to add tens of billions more. It’s madness.
Even worse, he isn’t being honest about it. Basically, he’ll allow the government to count spending on infrastructure or equity in companies as “assets” to offset against the cost of borrowing. It’s an accounting fix and he hopes voters and the bond market won’t notice. This will be accompanied by lots of blether about “meeting fiscal rules”.
There’s a long-standing argument on the left that “borrowing to invest” is a good thing. And maybe it was when interest rates were closer to zero. I’ve never really bought it myself. Every penny we borrow ends up on the national debt, as will Healey’s £9billion, if he goes for it. And interest rates are no longer low. Borrowing to invest can make sense for a company. It’s under pressure from shareholders to pay it back. But we all know politicians will let the debt and deficit roll along for the next government to fix. The Tories did that too.
Reeves started Labour’s tax, borrow and spend spree. She also rewrote the UK Treasury’s fiscal framework to give herself the headroom to borrow billions for capital investment without technically breaching fiscal targets. But she held back from pulling the trigger. Or was fired before she got round to it.
She set this up, now Healey is preparing to boot it into the net. While insisting he’s sticking to inherited rules. Which he conveniently ignores were inherited from Reeves.
He couldn’t have chosen a worse moment, as the national debt hits a terrifying new milestone. How many years will it be before it hits £4trillion? At current speed, it won’t be long. Unless the bond market steps in to save us. It doesn’t look like Andy Burnham will. Holidays come first.
