Starmer sets out to make public finances a team sport

Sir Keir Starmer's argument is that Covid has "changed the axis of the economy" and that the public is now comfortable with a government doing more to help, invest, and protect families and businesses.

The government itself would not wildly disagree with the Labour leader's general suggestion.

There is, however, a question about the extent of that change and the speed with which the brakes are applied to record government borrowing, as the economy is reopened.

The totemic Labour policy announced today proposes accessing the excess of household public savings during the pandemic, calculated by the Bank of England at £125bn, in order to help fund the recovery.

Savers would get an attractive and secure interest rate from this British Recovery Bond - and the government a decent slice of long-term funding to redirect to small business loans and infrastructure, for example.

The majority of those savings are currently expected to sit in bank accounts earning low or no interest.

Sir Keir is trying to make the public finances a participation sport.

The need to pay extra taxes at some point shows that is already the case. This a gentle lean into a more global argument where high levels of public borrowing will be tolerated to secure the recovery from an historical economic hit.

Most clearly this is being seen in the new US administration "going big" on a spending and borrowing stimulus, including $2,000 cheques for families. The government would say it already went "big" in terms of the Covid-19 rescue and plans to do so on investment spending as part of its "levelling up" agenda.

But as Chancellor Rishi Sunak told me last week, he wants to be "honest" with the public about bringing the public finances down from record levels at the Budget.

The Treasury points to the fact that the UK's borrowing is near the top of the league of comparable countries and it does not have the same status to print dollars as the United States. It also calculates that the public knows that a bill is coming for a year of Covid rescues.

The opposition now says that needs to be put off to the "medium-long term", including tax rises on business.

Even though Sir Keir won't get to enact his plans right now, they could affect the ongoing balancing act between a Number 10 with low tax and high infrastructure-spending instincts, and a Number 11 trying to find a quicker path out of record amounts of red ink.

It is a tension that will underpin every coming decision over the timing of tax rises and the rollback of coronavirus support measures, from the furlough scheme to universal credit.

And despite the expetced post-vaccination rebound, the argument is that a fragile economy should not be subject to tax rises and spending cuts at this precise moment. Borrow more from the public right now, don't tax them more.