Sir Keir Starmer will warn that a Labour administration will not be able to “turn on the spending taps” and the party must have an “obsession” with economic growth to raise living standards.
The Labour leader will say that a government he leads would be “ruthless” when it comes to prudent public spending.
He will address a conference hosted by the Resolution Foundation think tank, which has a report out saying the UK has seen 15 years of relative decline, with productivity growth at half the rate seen across other advanced economies and flatlining wages costing the average worker £10,700 a year in lost pay growth.
The living standards of the lowest-income households in the UK are £4,300 lower than their French equivalents, the Resolution Foundation report said.
Sir Keir will argue that the state of the public finances will not allow an incoming Labour administration to embark on a taxpayer-funded spending spree to address the situation.
Labour will face “huge constraints” on what it can spend following 13 years of Conservative mishandling of the economy, he will say.
Following a cost-of-living crisis and stagnant growth, Sir Keir will say “Britain is going backwards” under Prime Minister Rishi Sunak’s stewardship.
He will declare the “political consensus” that hard work will be rewarded has “become nothing short of a lie for millions of people” under the Tories.
Bank of England Governor Andrew Bailey last week suggested the UK economy’s potential to grow was among the worst he had seen in his lifetime while the Office for Budget Responsibility has downgraded its forecasts for the coming years.
At the conference in London, Sir Keir will set out his stall for why voters should trust his party with reviving the economy ahead of a likely general election in 2024.
It comes after he, in a move viewed as a pitch to Conservative voters, used an article in The Sunday Telegraph to praise the pro-privatisation former Tory prime minister Margaret Thatcher for having “set loose our natural entrepreneurialism”.
Sir Keir will say that those expecting an incoming Labour government to “quickly turn on the spending taps” will be “disappointed”.
“Growth will have to become Labour’s obsession if we are to turn around the economy,” he will say.
Sir Keir will claim the likely inheritance for his party if it wins the next election will be an economy in a worse position than the one Labour left following the global financial crash.
“Now, debt and interest rates are much higher. Britain’s standing is diminished. Growth is stagnant and public services are on their knees.
“Taxes are higher than at any time since the war, none of which was true in 2010.
“Never before has a British government asked its people to pay so much, for so little.
“Inflation, debt, taxes; we face huge constraints.”
Sir Keir will point to declining living standards under successive Tory prime ministers, concluding that the governing party’s record “has been a bad bargain for the British people”.
“This Parliament is on track to be the first in modern history where living standards in this country have actually contracted,” he is expected to say.
“Household income growth is down by 3.1% and Britain is worse off.
“This isn’t living standards rising too slowly or unequal concentrations of wealth and opportunity. This is Britain going backwards.
“This is worse than the 1970s, worse than the recessions of the 1980s and 1990s, and worse even than the great crash of 2008.”
Labour’s approach will focus on supporting the UK’s “huge assets” — its financial sector, highly educated population and world-class universities — by carrying out supply-side reforms.
Sir Keir will pledge to tackle restrictive planning laws, create a competitive tax regime, place more emphasis on skills, and draw up an industrial strategy alongside business.
The next Labour government will also broker a “new deal to make work pay”, with increased mental health support, a fully funded plan to cut NHS waiting lists, end zero-hour contracts, ban fire-and-rehire practices and introduce a “real living wage”.
Conservative Party chairman Richard Holden said: “The largest ‘constraint’ to growing the economy would be Labour’s £28 billion a year borrowing plan, which independent economists warn would see inflation, interest rates and people’s taxes rise.
“It is the same old short-term approach from Labour — borrow more and the British people will pay more.”
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