The UK's budget issues have their roots in the 2008 financial crisis.

In recent weeks, economic reports from the U.K. have primarily centered on the condition of the national economy and its potential effects on the public and economic growth prospects.

The budget deficit has been a source of contention between the Labour and Conservative parties, with accusations and denials flying between current and former finance ministers Rachel Reeves and Jeremy Hunt.

Despite the current state of the U.K.'s fiscal situation, it is clear that the current shortfalls are a result of years of neglect and could have long-lasting consequences. The challenge for Labour now is to find a way to close the systemic shortfalls without sustained economic growth, but also to create economic growth without significant investment from both the public and private sectors.

The current fiscal situation can be traced back to the financial crisis of 2008, which resulted in the country's economy failing to quickly recover from the budget deficits that followed.

In response to the failure of U.K. revenues to recover, the Conservative government opted for austerity measures, which involved temporarily reducing public investment in various areas, including infrastructure, public health, and social services.

The issue is that despite being marketed as a temporary fix, these measures persist, and the expense of the aging population in the U.K., the economic impact of Brexit on various sectors, and slow economic growth limit the options available to the current Labour government.

Unlike countries such as the United States, China, or Japan, the U.K. government cannot run large-scale deficits by increasing spending or cutting taxes. The country's debt has reached 100% of GDP, with borrowing in the financial year to August standing at £64.1 billion ($85 billion).

In recent years, Britain's status as a reserve currency has been challenged, as events have shown that the private sector is no longer willing to support significant deficit spending, particularly from tax cuts.

Both Labour and Conservative leaders are aware of the limited financial resources available to fund public programs. One argument in favor of Brexit is that the money being sent to the European Union could be used to restore funding to the National Health Service.

The upcoming Labour Party Conference and the release of the first budget of the new Labour government have sparked concerns about new levels of austerity, particularly with regards to potential cuts to winter fuel benefits for U.K. pensioners and the sustainability of current budget deficits.

The new Labour government has made it clear that they have no plans to impose further austerity on public services, as emphasized by Reeves' speech on Monday afternoon.

The challenge for Labour is to balance the need for increased public investment in services and infrastructure with the need to attract more private sector investment to boost revenue and economic opportunities.

The government's proposed plan to use private development funds to improve the HS2 rail line and Euston Station in London may provide a sign of possible solutions. However, any partnerships must ensure that both investors and the public benefit to avoid repeating the negative outcomes of previous privatizations, such as those with Railtrack and Thames Water.

Numerous companies have voiced their dissatisfaction with managing their supply chains due to the uncertainty and delays caused by Brexit.

The possibility of raising taxes, which has been rejected by the new government, may be acceptable to businesses and markets if they perceive the benefits in terms of enhanced services and business infrastructure.

To establish a stronger environment for public confidence in its economic plans, Labour must provide a clear long-term plan for execution, whether in tax and fiscal policy or in courting and building long-term public-private partnerships. If the private sector sees a clear plan, it will be more likely to support Labour's economic plans.

Kevin Klowden is the chief global strategist at the Milken Institute.