Moment of truth for Labour as economic reality bites: RUTH SUNDERLAND

The International Monetary Fund (IMF) has delivered a dose of cold reality to the fantasy economics spouted by Labour’s leadership pretenders.

The IMF’s latest Article IV report on the UK punctures the imaginary worlds of Andy Burnham, where he can simply decide not to be in hock to the bond market, and of Angela Rayner, who thinks she can create a feather-bedded paradise for workers by decree.

The underlying fear is that a new Labour Prime Minister and Chancellor will be reckless stewards of the public finances and lose the confidence of the bond markets.

The same, of course, could apply to Reform, which is untested in government and appears to have a scattergun approach to economic policy.

The country, whose workers and pensioners are being squeezed to the hilt, faces pressures from rising welfare bills and energy costs taking a toll on households and businesses.

These will not abate even if the hostilities in the Middle East ease. The public purse will remain strained by an ageing population and the necessity to spend a lot more on defence.

Burnham has backed away from a previous proposal to exclude defence spending from the fiscal rules, perhaps realising it would not actually make bills for the tanks and ammo disappear.

But his assertion yesterday that he would keep within the fiscal rules is not especially convincing.

The UK is already being taxed as much as its citizens can bear and the bond markets will be a brake on borrowing so there will need to be more emphasis on spending cuts.

The Fund also takes an ominous tone on Chancellor Rachel Reeves’ argument that financial regulation became too risk-averse after the credit crisis of 2008 and should be reformed in order to give more support for investment and lending.

It cautions that, given the heightened global financial risks, including fears about private credit, ‘close attention’ should be paid to the overall resilience of the banking system.

The record is far from infallible on the UK. Memorably, the IMF warned of big drops in share and house prices if the UK voted for Brexit, neither of which happened.

But it is hard to argue when it recommends a ‘transparent public debate’ on the state of the nation’s finances and the policies, reforms and trade-offs needed if we are to pull ourselves off the road to ruin.

Politicians are highly unlikely to supply any such thing. The current crop – and not just in the Labour party – are too ignorant of economics, too self-serving or both to realise voters need the truth.

A key measure of success for any economy is its ability to create jobs for young people. On this, the UK is in dismal territory.

The Institute for Fiscal Studies (IFS) finds today that youth employment is now approaching its lows during Covid.

The IFS speculates about the rise of artificial intelligence (AI) and the poor state of mental health among the young, along with rising minimum wages.

The lack of a single clear cause makes life harder for Alan Milburn, who has been commissioned by the Government to investigate the curse of the NEETs.

To have nearly one million youngsters not in education, employment or training bodes ill for the IMF’s strictures about clamping down on benefits.

Hard to think of Michael O’Leary as an elder statesman: hard to think of him as anything, really, other than the Roy Keane of Ryanair.

The company wants to give him a new contract lasting until 2032, by which time he will be in his 70s. By then, he will qualify as a sage on the grounds of years, if not gravitas.

Not that he isn’t a deep thinker. He once mused that more good had been done for the world by cheap air travel than the wisdom of French philosopher Pascal: ‘The French have never produced a great philosopher.

'Great wine maybe, but no great philosophers. Ryanair is responsible for the integration of Europe by bringing lots of different cultures to the beaches of Spain, Greece and Italy, where they couple and copulate in the interests of pan-European peace.’

We will miss him – let’s hope not for many decades hence – when he makes good his threat to replace himself with someone nicer.