Britain faces ‘looming’ crisis without spending cut, says Mel Stride-backed report

Britain faces a looming fiscal crisis without reigning in spending and boosting the competitiveness of the City, according to a new report.

With annual per capita growth stagnating and public spending ballooning, the government needs to bring growth back to the economy and boost living standards, according to the Centre for Policy Studies (CPS) report named ‘Breaking the Cycle’.

“Urgent action is needed to fix our public finances and restore confidence in the UK economy,” shadow chancellor Mel Stride said, adding that the Tories did not support all recommendations in the report.

The report’s author Dr Gerard Lyons said the UK must control public spending and reduce the debt-to-GDP ratio, arguing that GDP per capita growth has stalled, while productivity growth has collapsed to just one-third of pre-2008 rates.

“The issues we face are real, sizeable but are solvable with the right policies. The central aim should be to grow GDP per capita,” Lyons said.

He added that “all policy decisions” should be geared to this goal.

“Although a repeat of 1976 is not inevitable, a fiscal crisis is a genuine risk. The current focus is on the Budget in late November, but if the government loses the confidence of international investors a crisis is possible at any time.”

Britain on the brink

Among the key policies championed in the paper is the abolition of stamp duty on shares, with Stride claiming there was “something quite attractive” about ending the levy.

He also suggested that the Tories would look to fix taxes with a “Laffer aspect to them”, where lower rates could yield higher revenue for the government. This includes capital gains and the stamp duty.

He also suggested the government should boost talent in Whitehall to improve operations while tax reliefs should be offered to help inactive people get into the national workforce.

Reeves faces a £40bn black hole in Britain’s public finances, with No 10 currently locked into policy discussions ahead of the November Budget.

Investor concerns over government borrowing costs and wider economic conditions have been growing in the last few months, with the monthly performance showing a notable sharp spike in yields.

Stride said: “For too long now we have lagged behind other countries in terms of growth and productivity.

“But the current government’s answer to that has been higher spending and higher borrowing. That is unsustainable, crowds out the private sector and pushes up inflation”