Optimism in the Labour economy? It can’t be

As of late we’ve been buried in headlines, whether it be the US-Israeli operations in Iran, the Epstein cronies’ struggles with the law, or the Gorton and Denton by-election. Yet, there was another shocking headline that recently came from the pressers, one far more harrowing. The occasionally identity-less Labour government finally has the means to back up its economic competency narrative: a record-breaking monthly budget surplus. Whilst it doesn’t completely solve what Health Secretary Streeting referred to as the ‘why Labour?’ problem, it’s a start.

Following on from Trussonomics, and the general pantomime that characterised the latter years of Tory governance, Labour had but one word to deliver to the electorate ahead of the 2024 General Election: ‘Change’. Now, at the time, that was largely intended to connote a change in political culture. That’s now a tough message to sell, given Labour has already lost a Deputy PM and US Ambassador due to tax scandal and Epstein links, respectively. So, the ‘adults back in the room’ narrative has lost all potency. But at least they have economic competence in lieu of Conservative economic calamity, right?

The government posted a record-breaking monthly budget surplus of £30.4 billion in January 2026, more than double that of January last year

As I wrote in a collaborative piece between The Boar and Warwick Economics Summit for the latter’s 25th Anniversary magazine: “Sandwiched between a languishing UK economy and the need for simultaneous radicalism, sensibility, and market awareness, [Labour’s 2025 Budget] certainly steadies the economic waters without charting a course for the seas of growth.” Principally, the government was always right. It just felt like Britain needed something more cutting-edge economically. Whilst practical, the approach was safe, akin to bubble-wrapping the economy like it were a vase, when in reality it needed to be glued back together. So whilst economic competence would be a fair assessment, so would a lack of market ingenuity and general passivity. Sorry, was this article meant to be optimistic?

To the delight of those who disagree with Modern Monetary Theory and the ‘fantasy economics’ of unfunded tax and spending plans, Labour seem to have turned a corner. The government posted a record-breaking monthly budget surplus of £30.4 billion in January 2026, more than double that of January last year. Higher capital gains tax rates, increased employers’ National Insurance contributions, and a surge in service and manufacturing sector growth, contributed to a shock economic win for Reeves’ chancery.  To quote Sandra Horsfield, senior economist at Investec, “It’s been a hat-trick of good economic news for once for the UK”, providing some much-needed breathing room for Starmer and his government.

Given GDP growth lulled in the final quarter of 2025 despite a productivity spike throughout the year, it’s surprising that Reeves will be able to head into Parliament to deliver her next major fiscal move, the March statement, with an economy heading in the right direction. In May of last year, the Chancellor claimed that the UK economy was “beginning to turn the corner”, and given her hard-wired fiscal rules now provide a solid platform from which a true growth trajectory can be charted, we can probably say she was right. Oh, look, we finally found that optimism the headline promised!

Labour can finally take the reins of the economic competency ‘adults in the room’ (or, for this analogy, ‘adults in the Treasury’) narrative and boast some fiscal figures that back it up

There remains, however, a long way to go. Labour needs to build on the back of this positive news and convert opportunity into material results, or it will all be for nought. But given the economic horror shows of the UK’s not-so-long-ago political past, even being in such a promising position deserves a certain amount of credit. There are areas in which the governing party can be questioned as of late. To name one, judgment: why was the US ambassador appointed, given his shameful connections with Jeffrey Epstein? Though this newfound economic optimism does not overshadow this and similarly poignant questions, Labour can finally take the reins of the economic competency ‘adults in the room’ (or, for this analogy, ‘adults in the Treasury’) narrative, and boast some fiscal figures that back it up.

Seizing the moment, Labour needs a clear growth strategy to build on its new evidence for its economic competence. Ending this article as it began, Health Secretary Streeting mentioned the ‘why Labour?’ problem (Streeting also suggested the government had no growth plan, but that’s thankfully getting into gear). Whilst the political-culture reform of ‘Change’ Labour once stood on leaves a lot still to be desired, the idea that the party can offer a composed set of reins over the British economy finally has some weight behind it. Whilst work remains to be done, it’s a start. Even hints of optimism, such as those articulated in this piece, feel somewhat uncanny in a sea of gloom consuming the government.