Daniel Hannan: Starmer’s pathological inability to cut spending will cost Britain dear

Lord Hannan of Kingsclere was a Conservative MEP from 1999 to 2020 and is now President of the Institute for Free Trade.

What is the greatest security threat to Britain? Easy. Our national debt. We have a bloated, wheezing government. Our per capita GDP is static.

Who cares whether we spend two, three or five per cent of GDP on defence when our GDP is not growing? To borrow from Kipling, “armed and agile” nations beat “rich and lazy” nations. As long as we refuse to countenance cuts in our welfare state, we will continue to fall behind more vigorous rivals.

We now know also that Labour will not, under any circumstances, reduce public spending.

Even three weeks ago, this was not obvious. There was talk of Starmer, under the influence of his hard-headed Irish advisers Pat McFadden and Morgan McSweeney, cancelling the Chagos deal rather than finding himself in the position of cutting the winter fuel allowance while handing money to Mauritius.

In the event, Starmer decided pay both the pensioners and the Mauritians. The only consistent theme is the deterioration of our public finances.

Labour is incapable of taking, as opposed to talking about, tough decisions. It invariably follows the line of least resistance, spending money without thinking about the consequences. I am reminded of Homer Simpson swilling down a jar of vodka and mayonnaise while cheerfully declaring: “That’s a problem for future Homer. Man, I pity that guy.”

Unwillingness to sustain short-term unpopularity was the curse of the previous government, but Labour has taken it to a new level.

After the winter fuel climbdown, no one believes that Rachel Reeves will balance the budget. No one thinks Liz Kendall will make it harder to claim sickness benefits. No one expects Labour, despite its promises, to keep the child benefit cap, or to hold out against outrageous public-sector union pay demands.

Labour’s strategy, if we can call it that, is to stay on the right side of its base. That base is no longer the workers but perkers (people whose salaries derive directly or indirectly from the state), shirkers (who will vote against any party that threatens to cut benefits), and the burqas (hardline Islamo-Gauchists).

Its approach will bankrupt Britain, and if we can see it, so can the bond vigilantes. Labour might hope to put the crisis off until after the next general election but, with four years to go, that is absurdly optimistic.

Far more likely is that there will be a gilt strike during this Parliament. Such things tend to happen under high-spending Labour governments.

Market turbulence forced Ramsay MacDonald to form a coalition in 1931, drove Clement Attlee into a devaluation in 1949, made Harold Wilson do the same in 1967, and pushed Jim Callaghan into the IMF bailout in 1976. All were more impressive leaders than Starmer.

Until recently, I was of the view that, painful though it would be, a financial crisis might be the least bad option for Britain, since it would force the government to live within its means and make possible a sustainable recovery.

But I am starting to wonder whether Starmer is capable of cutting spending however dire the situation. On the evidence to date, he will instead make a panicked grab for more revenue, using mechanisms that would put Charles I to shame. There will be taxes on houses, assets, pensions and inheritance, maybe even a Cyprus-style top-slicing of bank accounts.

None of it will be enough to stave off the collapse. But it will ensure that the collapse is deeper and the recovery slower – for taxes on savings are uniquely harmful to growth.

Does anyone imagine that, while all this is going on, we will be splashing out on fleets of nuclear submarines, next-generation drones, lift capacity, advanced communications satellites, rockets, aircraft carriers or tactical nuclear weapons? Do you believe it? Do you think the Chinese do?

Britain has traditionally beaten its rivals by being richer than them and mobilising credit more effectively. That was how we defeated Boney, the Kaiser and Hitler. It was how we took back the Falkland Islands with just a single year’s contingency reserve. But that was then. Now, in prioritising welfare benefits over defence, we shall find in the end that we surrender both.

Far-called, our navies melt away;

   On dune and headland sinks the fire:

Lo, all our pomp of yesterday

   Is one with Nineveh and Tyre!

Judge of the Nations, spare us yet,

Lest we forget—lest we forget!