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By Sir John Redwood on July 7, 2025

The 1974-9 Labour government ran out of money by 1976 and had to go to the IMF to borrow. That entailed agreeing to cut spending and sell some assets as the state had over extended. Tax rates were high, driving rich and hard working people abroad in the brain drain. Borrowing was excessive. Interest rates were very high. The government had to borrow some money at more than 15% interest rate. The country effectively went bust. The Labour government fell thanks to its economic disaster.

The next Labour government elected in 1997 followed Conservative spending and borrowing policies for its early years, which worked well. Then it decided it should spend and borrow more. It worked with the Bank of England on an asset bubble with excessive bank credit driving up prices and creating excessive options, leveraged funds and futures. By 2008 it was clear they had overdone it. They created a credit crunch which brought banks down and meant once again the state ran out of money. The great recession followed.

This time round they are seeking to overdo the spending and borrowing right at the start of their term. They have spent and wasted too much, with plans to borrow £180 bn more than the Conservatives planned over five years. How long before markets teach them another expensive lesson?