Labour’s “Rebuild” Campaign Under Fire for Clinging to Outdated Economic Orthodoxy Amid Costly Central Bank Policy
LONDON – The Labour Party’s “rebuild, rebuild, rebuild” campaign is drawing sharp criticism from economists and political observers who argue that the policies promised by Keir Starmer and shadow chancellor Rachel Reeves are rooted in outdated economic thinking and fail to address the structural weaknesses of the British economy in 2025.
At the heart of the critique is Labour’s continued adherence to the fiscal and monetary frameworks forged in the late 1990s and early 2010s—models shaped by figures such as Gordon Brown and George Osborne, but increasingly seen as ill-suited to today’s global economic realities.
Outdated Playbook in a New Era
Labour's platform emphasizes fiscal discipline and monetary stability, echoing the policy doctrines of New Labour’s central bank independence and Conservative-era fiscal rectitude. But critics argue that this approach ignores the radically changed global environment: one where global trade has declined, geopolitical tensions have risen, and the neoliberal order is in retreat.
“The world Labour is preparing for no longer exists,” noted one commentator. “We’re living through a historic shift away from frictionless globalization. Yet Labour is dressing 2025’s problems in 1997’s costumes.”
Quantitative Tightening: The Hidden Drain on Public Funds
The most concerning issue for critics lies in Labour’s tacit endorsement of the Bank of England’s aggressive quantitative tightening (QT) programme, the process by which the central bank is selling off the government bonds it purchased under the earlier quantitative easing (QE) initiative.
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During the 2010s, the Bank created money to buy government debt, stabilizing the economy and the financial system. However, the reverse process now—selling those bonds in a higher interest rate environment—means massive losses, which are being covered by the Treasury, effectively transferring public funds to the financial sector.
The estimated cost to the Treasury? Nearly £40 billion annually. This figure exceeds the cost of major public policy reforms such as universal childcare, social care improvements, or lifting the controversial two-child benefit cap.
What’s more, the Bank is also paying high interest on reserves to commercial banks—a further quiet subsidy to the financial sector that has gone largely unchallenged by political leaders.
Fiscal Restraint, Public Austerity
Despite promising transformative change, Reeves has committed to tight spending controls, with departmental budgets rising more slowly than in the previous Parliament. Critics argue that these constraints are not rooted in economic necessity but are ideological, shaped by outdated Treasury rules that treat self-imposed limitations as natural economic laws.
“This isn’t prudence—it’s policy paralysis,” one expert stated. “The state is not broke. It’s being deliberately starved by its own financial architecture.”
Alternatives Within Reach
Many economists and analysts believe there are viable alternatives available to a future Labour government, including:
- Pausing or slowing QT, as other G7 central banks have done
- Reforming reserve interest payments to limit windfalls to banks
- Ending or modifying the Treasury indemnity that covers Bank of England losses
- Reclaiming political discretion over monetary policy during periods of extreme economic pressure
They note that the UK government still underwrites the Bank’s losses and has the legal authority to intervene in “extreme economic circumstances.” Given the £150 billion estimated total cost of QT, many argue such an intervention is long overdue.
Legacy of Central Bank Independence
The roots of Labour’s current caution can be traced to Gordon Brown’s 1997 decision to grant the Bank of England operational independence—a move designed to assure markets of Labour’s fiscal responsibility. But critics argue that this deference has now calcified into unquestioned dogma, even as the economic context has changed dramatically.
Before 1997, even Conservative chancellors like Ken Clarke frequently overruled the Bank. Today, the idea of monetary discretion has become taboo—despite the immense fiscal consequences of current Bank policy.
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Austerity by Another Name?
Some economists have dubbed Labour’s current stance “austerity by amnesia.” While the party talks of investment in infrastructure—such as new tramlines and nuclear projects—analysts note there is little clarity on how these will be sustainably funded if Reeves refuses to challenge the monetary policies that siphon off tens of billions annually.
“This isn’t rebuilding—it’s slow-motion decline,” one policy researcher commented. “Reeves is offering necessary sacrifice to the financial gods, while local councils collapse and public services erode.”
The Political Risk
The danger, critics warn, is not only economic mismanagement, but also political miscalculation. The vacuum left by Labour’s refusal to challenge QT has already been exploited by populist figures such as Nigel Farage, who frames the issue as a betrayal of working-class taxpayers.
Labour is reportedly exploring new taxes on banks—but commentators argue this is a distraction from the much larger issue: reforming the structures and policies that allow wealth to flow from the public purse into private financial institutions unchecked.
The historical echo is not lost on critics. Some have compared Reeves to Philip Snowden, Labour’s first Chancellor in the 1930s, who insisted on balanced budgets amid economic collapse—ushering in stagnation and a dramatic electoral defeat.
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