THERE are widespread reports that the Chancellor Rachel Reeves will not introduce any tax or spend measures in the Spring Statement on March 3. This would be a mistake.

The G7 economies are struggling and the British economy is among the worst. We are effectively stagnating, and unemployment is rising. This is no time for passivity.

The economy is failing to deliver for the population, while the turmoil in British politics reflects that.

Of course, any commitment not to make things worse for workers and the poor would be welcome. Doing nothing would be an improvement on the last two Reeves’s Budgets, which deepened the austerity that the Tories had bequeathed.

It is amazing to me that it is ever disputed that this government has implemented austerity.

This was the government that carried out the stealth tax of freezing income tax thresholds, raised energy prices and fares, pushed council tax higher and imposed sub-inflation pay rises in the public sector.

At the same time, water companies are allowed to get away with crimes and the piecemeal privatisation of the NHS continues, along with PFI. This list is very far from exhaustive.

Austerity has also damaged our medium-term prospects by cutting public investment and diverting a large portion of it to military spending. As a result our basic infrastructure is dilapidating, we have holes in the ground where railways should be and the housing crisis is deepening.

The government’s new priority is meeting Trump’s demand to contribute to his war drive. Keir Starmer declares it his major priority. The forced march to the unfeasible target of 5 per cent of GDP on military spending will be accelerated. This would take it up to roughly the same level as the education budget at a time of general fiscal constraint.

In current circumstances sharply increased military outlays can only be achieved by cutting spending on other areas of government spending. These are important areas such as public services and welfare, but they would be sacrificed for a war drive which leaves us worse off and more likely to go to war.

It is no surprise that renewed austerity, cutting public investment and diverting some of that to unproductive military spending has damaged the economy.

The latest quarterly GDP data confirm we are flatlining. The economy barely grew at all in the final quarter of 2025 and the annual trend growth rate over the medium term is effectively 1per cent.

Placing enormous millstones like these around the neck of the economy and then trying to offset that by deregulation and talk of “animal spirits” is pure Thatcherite nonsense.

But this is where we are now.

We are told that all this is necessary in order to placate the bond markets. It is rather strange, though, how cutting special educational needs is vital, but wasting over £5 billion on operationally useless Ajax tanks is just fine.

Most of the claims made for the bond market are spurious, simply special pleading for subsidies, to arms’ manufacturers, or PFI financiers, or water company creditors. It is not to be taken seriously.

The conceptions about the bond market are quite wrong too. Right-wing governments love to use the disciplinary effect of the bond markets as a means to oppose public spending they disapprove of; public investment, welfare spending, spending on public services.

Infamously this was the mechanism used by the Labour government of Callaghan and Healey to invent a fictional IMF crisis in order to cut useful public spending. This led directly to the Winter of Discontent and the election of the Thatcher government.

History is in danger of repeating itself.  

Like all lenders, bond market investors want to be repaid. Continuous austerity, which saps the the economy and leads to slower growth, does not increase their confidence, simply because the economy is not generating enough new revenues.

There is a technical measure which compares the economic growth to interest rate on government debt. Before adjusting for inflation, the annual GDP growth rate over the last two years has been 5 per cent. But at certain points over those two years, the interest rate on medium-term government debt has been perilously close to 5 per cent.

They use this measure because the danger becomes quite clear. If the interest rate exceeds the growth rate, debt and the interest payable on it will soon spiral out of control. And in the era of free movement of capital, investors cannot be forced to buy bonds.

Thankfully, the answer to this conundrum is the same as the predicament for the economy as a whole. Higher growth removes the risks of being swamped by debt and interest payments. More importantly, it is also the answer to the economic crisis. It also tackles the underlying cause of the political crisis.

The first step onto the path of growth would be to completely reject all further austerity measures. But this government would also have to drop its ideological commitment to relying on the private sector.

Deregulation and pleading with business to invest is failing, as it has done for a generation. Business investment was cut again in the final quarter of 2025. 

Instead, the government needs to significantly increase its own investment. There is no shortage of areas of the economy which would benefit from increased investment. This would kick-start economic growth and draw in parts of the private sector who act as suppliers to government projects.

To take one obvious example, government, national or local, could engage in a massive housebuilding programme, address the housing crisis, put people back into work and generate new revenues for government finances, both rents and income tax paid by the housebuilding workers.

Those revenues can be used for further public investment or increased public spending, depending on political priorities.

The more recent objection to public investment has come from some quarters on the left.

The argument is made that borrowing costs are too high, so borrowing for public investment is uneconomic. But we have already seen, interest rates are below the current growth rate and significantly increased public investment will lift that growth rate while pushing down on inflation.

The lobby for inactivity literally has nothing to offer.

Kick-starting public investment can easily be funded. The first place to start is by cutting back on the military budget, towards former levels close to 2 per cent of GDP. That will ease pressure on government finances and alleviate any concerns about borrowing risks. 
We need a plan for growth, not a do-nothing approach, or still less a war drive.