Healey’s state gamble risks repeating 1970s disasters

For most people, the 1970s were a dark decade. Energy was rationed, three-day weeks were imposed, and rubbish heaped up in the streets. For Andy Burnham, however, they were halcyon days to which we should return, as he never tires of suggesting. His Chancellor appears to have got the message. Next week’s Budget will see John Healey pour some £20bn more into the state-directed National Wealth Fund and the British Business Bank, and instruct them to back “strategic” sectors with this borrowed money.

It is a policy with worrying echoes. The state “picking winners” in the late 1960s and 1970s brought us such disasters as British Leyland. Piling yet more debt onto the nation’s already maxed-out credit card in some vain hope of doing better this time is the last thing Britain needs. The Left seemingly never learns that state bureaucrats cannot outwit the market. They have no special gift for spotting the next great company. When the Government intervenes, it directs capital towards whatever is politically fashionable, such as green projects.

It does not flow to where it would earn the best return, and the overextended British taxpayer ends up on the hook . Such Government largesse also risks crowding out the private sector, reducing investment. The Treasury may insist that the borrowing is “neutral” because the money becomes an asset on the public balance sheet. But a loan to a firm that fails is a liability to the taxpayer, however it is booked. And the National Wealth Fund’s track record is mixed, to say the least, losing well over £100m in two of the last three years.

Mr Burnham and Mr Healey suggest that their job is to provide “breathing space” to business at next week’s Budget. This move will do nothing of the sort. Instead, they should ask why “breathing space” is so desperately needed in the first place. Business has been hammered by Labour. Soaring taxes and employer’s National Insurance contributions , increased minimum wages, burdensome new employment legislation and sky-high energy costs have placed an intolerable strain on the backbone of the economy.

Without relief, Britain will remain stuck in our present doom-loop of high debt and high tax, in which everyone steadily gets worse off. The answer is not to encourage the state to step in yet further, but to pull it back. Real breathing space means lowering taxes, unleashing our energy supply and lifting the dead hand of regulation. The 1970s were a warning, not a blueprint.