Malcolm Gooderham is the founder of Elgin Advisory, and a former Conservative Party adviser.
Labour has yet to present details of their economic and fiscal plans for government, despite protestations that they are ready for office. The void suggests one of three things: decisions have been taken, but are being withheld; Keir Starmer, Rachel Reeves and Angela Rayner have conflicting positions that need to be reconciled before plans can be announced; or there are no detailed plans.
We are told that the Shadow Chancellor will provide more clarity tomorrow. To do so, she is flying nearly four thousand miles to deliver a speech to a Washington based think-tank. This may strike some voters as odd. However, she is primarily focused on British commentators not voters, believing this tactic will buy her credibility and time.
Team Reeves calculates that the optics of being in DC and the footage, photos and appearance, will improve her profile and reputation – and, in turn, deflect demand for thorny detail. They want the Shadow Chancellor to bask in some reflected glory from such senior economists as Adam Posen and, for Democrats in particular, Janet Yellen. The latter depicts her economic agenda as ‘modern supply-side economics’. In the absence of substance and even a soundbite for their own vision, Reeves has taken to using this uninspiring term.
In order to convince enquiring investors and business leaders, Reeves should use the speech to address questions about Labour’s agenda.
1. Fiscal: Will Labour commit to the Conservatives’ spending envelope for the next Parliament?
Pledges to date suggest some loosening, but it is uncertain whether they it be within the current spending envelope, or form part of a new – and more expansive – budget. Gordon Brown, as Shadow Shancellor, sought to neutralise concerns about fiscal imprudence by committing to the Conservative spending plans ahead of the 1997 general election. Many feel Reeves would be wise to do the same in the coming months.
2.Inflation: How will Labour’s plans to increase state spending avoid fuelling inflation – so causing ‘second round effects’?
This could lead the Bank of England to keep interest rates higher-for-longer. The Bank of England’s latest Monetary Policy Report emphasised ‘upside risks’ to their forecast and now expect overall inflation to drop to five per cent by the end of this year, above the four per cent previously predicted.
3.Taxes: Will Labour rule out raising taxes on pensions and savings to fund fiscal plans?
To date, two tax plans have been confirmed: introduction of VAT on the fees parents pay for their children to attend independent schools, and ending the ‘non-dom’ regime. There has been confusion as to whether Capital Gains Tax will be adjusted, which seems to have been swept up in a policy review of business taxation (only announced in March). Details as to when this will conclude would be welcomed by business leaders.
4.Growth: To what extent do funding Labour’s plans rest on higher growth than forecast by the OBR?
It remains to be seen how Labour will score their plans and provide their own targets for GDP, which have a heavy ‘green’ component.
5.Green New Deal: What impact will the ‘green plan’ have on national income and over what time-frame?
Reeves made a bold pledge on becoming shadow chancellor, that if elected Labour would invest £28 billion a year in a ‘green’ transformation agenda to decarbonise the economy. Followed by a commitment to create a “National Wealth Fund” which would have an injection of £8 billion in state capital to leverage private sector investments. The return on investment for this largesse is required to give credibility to these plans.
6. The Labour Market: How will legislation to promote trade union powers promote economic growth and lagging productivity in the public sector and private sector?
It is baked-in that their trade unions would be granted new rights and powers. The economic case for this agenda is controversial and unlikely to feature in many, if any, speeches between now and polling day.
Were Reeves to return to the UK with these questions largely unanswered it would leave her open to accusation of engaging in a long-distance publicity stunt. And as such, her team may have unwittingly drawn attention to the lack of substance in their plans.
Beyond what she says and does, the scrutiny of Sir Keir’s grip on fiscal and economic policy will steadily increase as polling day comes into view. To date, his lack of attention to fiscal matters inside and outside the House of Commons is revealing. It suggests a lack of confidence on such issues, or that Labour believe their comparative advantage is concentrated in other areas. Either way the persistence of this bias would undermine his case to be First Lord of The Treasury.
Following the March Budget, pollsters at Opinium found that Starmer and Reeves were less trusted on the economy than Sunak and Hunt. While this may challenge other polling on ‘economic trust’ ratings, it may also point to voters gaining confidence in the Conservatives and the memory of the ‘mini-budget’ and Truss Administration fading. Either way, both Labour and Conservative Party managers will be mindful that leaders who trail their opponents on economic matters do not typically win general elections for their parties.
Malcolm Gooderham is the founder of Elgin Advisory, and a former Conservative Party adviser.
Labour has yet to present details of their economic and fiscal plans for government, despite protestations that they are ready for office. The void suggests one of three things: decisions have been taken, but are being withheld; Keir Starmer, Rachel Reeves and Angela Rayner have conflicting positions that need to be reconciled before plans can be announced; or there are no detailed plans.
We are told that the Shadow Chancellor will provide more clarity tomorrow. To do so, she is flying nearly four thousand miles to deliver a speech to a Washington based think-tank. This may strike some voters as odd. However, she is primarily focused on British commentators not voters, believing this tactic will buy her credibility and time.
Team Reeves calculates that the optics of being in DC and the footage, photos and appearance, will improve her profile and reputation – and, in turn, deflect demand for thorny detail. They want the Shadow Chancellor to bask in some reflected glory from such senior economists as Adam Posen and, for Democrats in particular, Janet Yellen. The latter depicts her economic agenda as ‘modern supply-side economics’. In the absence of substance and even a soundbite for their own vision, Reeves has taken to using this uninspiring term.
In order to convince enquiring investors and business leaders, Reeves should use the speech to address questions about Labour’s agenda.
1. Fiscal: Will Labour commit to the Conservatives’ spending envelope for the next Parliament?
Pledges to date suggest some loosening, but it is uncertain whether they it be within the current spending envelope, or form part of a new – and more expansive – budget. Gordon Brown, as Shadow Shancellor, sought to neutralise concerns about fiscal imprudence by committing to the Conservative spending plans ahead of the 1997 general election. Many feel Reeves would be wise to do the same in the coming months.
2.Inflation: How will Labour’s plans to increase state spending avoid fuelling inflation – so causing ‘second round effects’?
This could lead the Bank of England to keep interest rates higher-for-longer. The Bank of England’s latest Monetary Policy Report emphasised ‘upside risks’ to their forecast and now expect overall inflation to drop to five per cent by the end of this year, above the four per cent previously predicted.
3.Taxes: Will Labour rule out raising taxes on pensions and savings to fund fiscal plans?
To date, two tax plans have been confirmed: introduction of VAT on the fees parents pay for their children to attend independent schools, and ending the ‘non-dom’ regime. There has been confusion as to whether Capital Gains Tax will be adjusted, which seems to have been swept up in a policy review of business taxation (only announced in March). Details as to when this will conclude would be welcomed by business leaders.
4.Growth: To what extent do funding Labour’s plans rest on higher growth than forecast by the OBR?
It remains to be seen how Labour will score their plans and provide their own targets for GDP, which have a heavy ‘green’ component.
5.Green New Deal: What impact will the ‘green plan’ have on national income and over what time-frame?
Reeves made a bold pledge on becoming shadow chancellor, that if elected Labour would invest £28 billion a year in a ‘green’ transformation agenda to decarbonise the economy. Followed by a commitment to create a “National Wealth Fund” which would have an injection of £8 billion in state capital to leverage private sector investments. The return on investment for this largesse is required to give credibility to these plans.
6. The Labour Market: How will legislation to promote trade union powers promote economic growth and lagging productivity in the public sector and private sector?
It is baked-in that their trade unions would be granted new rights and powers. The economic case for this agenda is controversial and unlikely to feature in many, if any, speeches between now and polling day.
Were Reeves to return to the UK with these questions largely unanswered it would leave her open to accusation of engaging in a long-distance publicity stunt. And as such, her team may have unwittingly drawn attention to the lack of substance in their plans.
Beyond what she says and does, the scrutiny of Sir Keir’s grip on fiscal and economic policy will steadily increase as polling day comes into view. To date, his lack of attention to fiscal matters inside and outside the House of Commons is revealing. It suggests a lack of confidence on such issues, or that Labour believe their comparative advantage is concentrated in other areas. Either way the persistence of this bias would undermine his case to be First Lord of The Treasury.
Following the March Budget, pollsters at Opinium found that Starmer and Reeves were less trusted on the economy than Sunak and Hunt. While this may challenge other polling on ‘economic trust’ ratings, it may also point to voters gaining confidence in the Conservatives and the memory of the ‘mini-budget’ and Truss Administration fading. Either way, both Labour and Conservative Party managers will be mindful that leaders who trail their opponents on economic matters do not typically win general elections for their parties.