Hard times: why Rachel Reeves must be bold and ditch her Dickensian rulebook

In her crucial statement this week, the chancellor would do well to reject the Gradgrind mindset

- Will Hutton

There are two inconvenient if fundamental truths about Britain's economic and budgetary stasis. The first: Labour's ceaseless repetition about its terrible legacy has led its army of critics almost to dismiss the profundity of our economic plight as political staging. Yet a succession of feckless, intellectually bankrupt Conservative governments really did leave a disastrous mess.

The second: while there must be a determined response, it must be more than regressing to the Gradgrind orthodoxies of the penny-wise, pound-foolish "Treasury brain". A Labour government must have a credible political vision and some imaginative, progressive ways of finessing the desperate need for more resources for defence, together with repairing our overstretched public services; of boosting growth and raising extra revenue that does not provoke electoral wrath. It's not just the Labour party and its voters that expect this - so do financial markets, which understand that economic and political credibility are intertwined.

Turn to the first truth that Britain lives on a tightrope. Our international accounts have been in the red continually since 1984, paid for by selling off land, companies and property to foreigners, so we now dangerously owe the rest of the world increasingly more than it owes us. At home, the last primary overall government budgetary surplus was in 2000. The national debt is about 100% of GDP; annual interest payments exceed £100bn and represent close to 4% of GDP. Productivity is poor and its growth paltry. Our stock market ails, with very few hi-tech growth companies. Britain is not the US or Germany, which can and now do take fiscal risks: we are an outlier, certainly with some underlying strengths in our innovation and our science base, but essentially vulnerable.