Comrades! A confession: I quite like Rachel Reeves. Not in the way in which I once nursed a teenage tendresse for Penny Mordaunt (long since abandoned) but because in a Shadow Cabinet where she rubs shoulder with a lady who thinks I’m scum and a man who believes Henry VII came after Henry VIII, she is by far the most interesting member.
By this, I mean that she sometimes agrees with me. I don’t agree with Mary Portas that the MP for Leeds West would be “the best-qualified Chancellor ever” on entering the Treasury – she did do PPE, after all – but I did find myself nodding along to her conference speech this afternoon.
“Globalisation as we once knew it is dead”, the Shadow Chancellor intoned, sacrificed on the altar of the pandemic, war, and climate change. In “this new age of insecurity” it is “no longer enough” for Westminster “to turn a blind eye to where things are made or who is making them”.
Rejoice, subsidy enthusiasts: ‘Securonomics’ is back. As I mentioned this morning, Reeves is more willing than Rishi Sunak to accept the need for some sort of industrial strategy to ensure our future energy and manufacturing independence if we want to compete with a Washington hooked on spending and a Beijing gearing up for war.
Reeves also pledged a “once-in-a-generation” reform to our planning rules to paroxysms of delight from YIMBYS everywhere. It wasn’t quite “The Town and Country Planning Act must be destroyed”. But at least she bothered to mention the housing crisis, unlike the Prime Minister.
Her hat tips to Atkinson articles past and present didn’t end there. The Shadow Chancellor established that Labour’s central mission will be “to restore growth” – the source of our current malaise. Reeves, like Sunak, made it clear she disliked our tax burden being at its highest since the war. But she made clear she would not “waver from iron-clad fiscal rules”. The former Bank of England economist will make not forget the Gods of the Copybook Headings.
Indeed, it wasn’t the Prime Minister that Reeves attacked most often in her speech, but his immediate predecessor. A spectre is haunting the Shadow Chancellor – the spectre of Liz Truss. Whether as an anecdote about a mental health nurse who couldn’t afford her first home due to rising mortgage rates, or in a pledge to never play “fast and loose” with the public finances, Reeves was very keen to portray her agenda as the opposite of Trussonomics.
Hence why she promised that not only would the independence of her former place of work be preserved, but that she would introduce a new “charter for budget responsibility”, ensuring any future government making significant tax changes would require an independent forecast from the Office for Budget Responsibility (OBR). “Never again”, she intoned, would Labour allow a repeat of the “devastation” caused by Truss’s forecastless mini-Budget. No wonder Mark Carney is on board.
But perhaps Reeves was being a little too harsh on the Seven Week Queen. It was Truss, after all, who brought prioritising growth into its current vogue. Claims she “crashed the economy” were wide of the mark: the turbulence of Trussonomics may have been an editorial Vietnam for those of us burdened with covering them, but their impact was temporary.
On the broader economic stagnation under 13 years of Conservative rule, however, Reeves was bang to rights. Aping Ronald Reagan remains Labour’s most potent attack line. As she concluded, how many of us can really say we feel better off, amidst a cost-of-living crisis, growing tax burden, and persistent, grinding inflation?
Nonetheless, before readers become too concerned that they’ve strayed onto LabourList, one must note that not every word from Reeves had me counting down the days until she might become the first female resident of 11 Downing Street. Indeed, most of her speech had me asking the same question that weary Tories have been asking of Labour since time immemorial: namely, how is it all going to be paid for?
Reeves aped James Callaghan in telling her party that “you cannot tax and spend your way to economic growth”. But as with Sunny Jim gloomily reading the last rites of Keynesianism, it was not a message her party members wanted to hear. Reeves may want to be the epitome of fiscal discipline. But her party isn’t interested.
Both Robert Colville and Kate Andrews have already highlighted that, for all the Shadow Chancellor’s efforts to constrain her colleagues from making big pledges for their future departments, the costs of their announcements continue to add up.
Wes Streeting wants to nationalise GPs and rapidly expand the NHS workforce – policies set to cost at least £5 billion and £50 billion respectively. Yvette Cooper wants another 13,000 police officers. She says they will only cost £360 million. But the Government’s efforts to hire another 20,000 already look set to cost more than £1 billion.
Add to those proposals for ‘Great British Energy’, a desire from Bridget Phillipson for a schools revolution on a par with the creation of the NHS, and the inevitable demands for more spending from backbenchers who have spent 13 years bewailing the impact of austerity, and it is easy to see how Reeves might struggle with balancing the books. That is even before the inevitable higher expenditure required by our aging (and ailing) population.
Reeves may do a good Sunak tribute act when it comes to posing as the voice of economic rationality and taking Trussonomics to tak. Like him, she also confronts a party willing to nod along to calls for higher growth, spending reform, or easing the tax burden, but unwilling to make the hard choices they require. Unlike Sunak, she also confronts a party still actively pining for class war.
She argued the “lifeblood of a growing economy is business investment”, and that for every penny of government investment a Labour government would introduce via a new National Wealth Fund, she would expect the private sector to give three times more. But those in the hall were much more interested in cheering a souped-up windfall tax on energy providers and a sales tax on online retailers.
Two of the biggest cheers of the speech came from her re-committing to both VAT on private schools and a closing of the non-dom loophole – despite both policies having the potential to cost the Treasury more than they raise. By contrast, appeals to fiscal responsibility and market confidence fell on stony ground (until Truss got a mention).
Those new measures of finding petty cash that Reeves did rollout – including a crackdown on the ministerial use of planes (!), a “Commissioner for Covid Corruption”, and a target of halving the governmental use of consultants – received the necessary whoops of appreciation from the faithful in the hall. But they are laughably inadequate for covering her party’s purported spending plans.
Perhaps, like Truss, Reeves really does believe she can grow herself out of the fiscal bind in which she finds herself. Perhaps she believes her new chumminess with the high priests of international finance will mean she will get a smoother ride on the markets than Kwasi Kwarteng. Certainly, she has more in common with the OBR’s advisory panel than any IEA groupee.
Or perhaps Reeves will find herself in much more familiar territory for Labour chancellors past and present. As ministers increasingly chafe at her Treasury’s shackles, as backbenchers become restless over anything akin to Tory penny-pinching, and as borrowing costs remain high in the face of demographic decline and an unstable world order, those iron-clad fiscal rules might get rusty. Pledges not to raise Income or Capital Gains Tax will depart out the window.
The age of “tax and spend” returns – or the markets get nervous. And a Shadow Chancellor who has made it her mission to make another Truss impossible might just end up repeating that historic farce as a tragedy.