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UK election-winner Starmer inherits weak economy with 'no magic wand' - REUTERS
LONDON, July 5 (Reuters) - Britain's next prime minister Keir Starmer spent the election campaign accusing Rishi Sunak's Conservatives of "14 years of economic failure", but he has no obvious quick fix to lift the country out of its slow-growth rut.
Living standards have stagnated since Conservatives took power in 2010 and Britain's recovery from the COVID pandemic has been the weakest among big rich nations after Germany.
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Starmer will be under pressure to use Labour's huge majority in parliament to end the sense of decline, from creaking public services and inflation-hit personal finances to a shortage of housing and weak business investment.
But with public debt at almost 100% of gross domestic product and taxes at their highest since just after World War Two, Starmer stresses the turnaround will take time.
"We're going to have to do really tough things to move the country forward," he told voters days before the election. "There is no magic wand."
Unlike in 1997, when Labour under Tony Blair ousted the Conservatives with the economy expanding by almost 5% that year, Starmer might struggle to get British annual growth above 2% in the foreseeable future, in line with much of a sluggish Europe.
Britain's economy is expected to grow by less than 1% this year.
The 2007-08 global financial crisis which hit Britain particularly hard, cuts to many areas of public spending and the shocks of Brexit, COVID and surging energy prices have combined to weigh on the world's sixth-biggest economy.
But Starmer and his likely choice of finance minister Rachel Reeves say they will not go on a borrowing binge to fund a growth push, with memories still fresh of the 2022 bond market rout under former Conservative prime minister Liz Truss..
They have also promised no major tax increases, leaving the new government with little room in the budget. "The fiscal inheritance will be a difficult one and there are a lot of challenges to address," Lizzy Galbraith, a political economist with investment firm abrdn, said. Unlike in 1997, when Labour stunned financial markets by handing operational independence to the Bank of England, its first economic policy move is likely to be low key.
