Britain needs a strong economy to be secure

If we want to invest in security, we need to be able to fund it.

Photo by Ian Vogler - WPA Pool/Getty Images

As winter arrives, what manner of government is this? Who are they really, this regiment of taciturn social democrats, Blairites unto the third generation and quietly defiant, prickly socialists? Good people, by and large, not in it for themselves, but their yoking together can seem more like a hubbub than a political project.

Until recently the easy answer would have been that they’re a government of growth. After Conservative stagnation, at last we would be building again, hiring again and generating the wealth to remake decent public services. We would be, as Keir Starmer and Xi Jinping would put it, “rebuilding the foundations”.

That might yet be the proper answer. These are still early days. Britain is still wedged into hard plastic chairs in the purgatorial economic waiting-room between the cash demands presented in the Budget and the goods being received – low waiting lists, more housing, better policing. In No 10 they still talk determinedly about long-term stability. The Office for Budget Responsibility, Starmer’s people point out, doesn’t factor in growth coming from the regulation or the planning reforms. This would never have been a popular period.

Perhaps, too, the furious post-hoc lobbying by big employers against the tax increases – the retailers, the independent GP surgeries, the farmers – will prove a passing turmoil and Rachel Reeves’ investment agenda will indeed kick into “get Britain working”. We don’t hear a lot, by the by, from all those who predicted capital gains taxes rising dramatically. The money had to come from someone.

Trouble is, not only are the growth statistics awful but the headwinds coming our way look worryingly strong. In November, private sector activity fell to a 13-month low as companies cut back on investment. A CBI survey suggested half of employers expect to cut jobs after the £25bn tax increase. Sterling dropped to its lowest level against the dollar since May. Retail sales slumped. Overall business confidence fell to its lowest since the end of 2022. We are barely growing at all. Will there be a “Reeves recession”?

Inflation is rising again, up to 2.3 per cent in October. Given the grim news from Ukraine, of which more later, and the Trump obsession with tariffs, much more inflation may be on the way.

In a stern warning to her former colleagues at the Bank of England, DeAnne Julius, who served on its monetary policy committee, says Britain faces stagflation. Writing in the Financial Times, she says the Bank should change direction, recognising “this new, and unwelcome, stagflation scenario. The risks of a resurgence in inflation are too great to continue cutting interest rates while inflationary pressures are so strong.”

So economically, there are tough times ahead. Yet we are often raging hypocrites; we demand better public services yet furiously resent any tax rises to fund them. A Budget which raised wages for millions and is putting money back into the NHS and state schooling – a Labour budget – is already being written off as a failure. I say, wait. Let’s hold our nerve. There was a lot to fix. But even I would struggle to call this, right now, a government of growth.

There is, however, an alternative way of thinking about the Starmer administration during what will be not only a bleak midwinter but a dangerous one. What Britain needs most urgently is a security government.

Nobody needs me to spell out why. There is a “don’t-panic” response to the Kremlin reaction to our permission for Storm Shadow missiles to be fired deep into Russia; and there is a “thanks but no thanks: let’s panic” response. And I am (just about) in the former camp.

Given Donald Trump’s planned appointments, including of Tulsi Gabbard for US intelligence, a woman described by the former UN ambassador Nikki Haley as a Russian sympathiser and briefly on an official US watchlist for overseas travel, it’s a reasonable assumption that Trump will give Putin most of what he wants by, say, February. Why would Putin go nuclear, infuriating China, when he is on the edge of a very big win?

But as the cabinet member Pat McFadden told a Nato conference in London on 25 November, there are many other things Russia might be up to. He warns of an eminent Russian cyberattack on British infrastructure, including on power grids, and businesses. The Kremlin is capable of a “destabilising and debilitating” electronic strike, he says, and is “exceptionally aggressive and reckless in the cyber realm”.

Everyone I talk to points out that the UK is dependent upon underwater cables, being closely investigated by Russians spy ships. The security services, the navy and the Home Office are all worried about a national vulnerability.

Keir Starmer, unlike Harold Wilson, is no economist, but he seems well suited to be leading a security government in dangerous times – disciplined, focused, unflustered. He has been overseas too much, allowing a sense of drift at home, but he performs well on the international stage. In the now-perpetual awkward dance between the EU, China and Trump’s America, he is suitably light on his feet, and suitably terse. For now, this is exactly what we need.

But for Starmer to lead a government that voters feel has a proper grip on security issues, there is a lot more to be done. He has finally said that he will set out a path to Britain spending 2.5 per cent of GDP on defence in the spring. A “path” is not enough, but I am told it will involve a hard date; and that the defence review will conclude before the Treasury’s general spending review gets its teeth into the MoD. That will reassure the US and send the right signal to the Kremlin.

But whatever “peace deal” is imposed by Trump, Europe’s medium-term outlook is more dangerous still. If Ukraine collapses politically, which must be likely, there will be an immediate asylum surge, further fast Russian advances and military uncertainty everywhere. The US will turn back to its rivalry with China, and Europe will be left chaotically alone.

John Healey, the defence secretary, has already begun new European defence links with his recent German treaty. Good; but can Britain forever lead with its plucky bulldog chin? Being a “security government” surely also means avoiding being the Kremlin’s number one target and prime European enemy, certainly while our own military is so weak.

Senior ministers and ex-ministers tell me there is no point in having a big parliamentary or national debate about all of this, as happened in the late 1930s, because on Ukraine virtually everyone agrees. That might be true. But in a parliamentary democracy, given the perilous time we are living through, is it good enough?

Meanwhile, on defence spending, we are going to have to go higher than 2.5 per cent. Where is the money going to come from? I haven’t a clue. And given the contraction of our manufacturing defence capability, a lot of the money would probably be spent in the US, not at home – another blow to the post-election optimism of growth government.

But there is that old lesson which, in the years of the peace dividend, so many forgot. For voters pushed against the wall, security (or “safety”, or “fear”) is an even more important motivation than immediate prosperity (or “good times”, or “greed”).

Now, whether that’s security on the streets, at the borders or across Europe, I devoutly don’t want this rare Labour moment to be remembered just as our security government. We all have higher aspirations. But we are where we are. And we are when we are. And that may be its fate.