I have long been fond of the 1992 general election. As a politics-mad teen, I poured over a copy of David Butler and Dennis Kavanagh’s election guide with an enthusiasm wholly inappropriate for a book with John Major on the cover. I watched the Election Night coverage on YouTube with the sort of manic diligence 15-year-olds should really only reserve for online pornography.
What impressed my younger self was how a sensible Conservative focus on the economic fundamentals won out against Labour’s pledges of tax ‘n’ spend. It is a wonder that I ever managed to get a girlfriend. Nonetheless, I’m not the only recovering public schoolboy who seems to have had Major’s unexpected triumph cross their mind.
Jeremy Hunt’s Autumn Statement confirmed what I have been saying for a year: that Rishi Sunak and the Chancellor plan to set the same spending trap for Labour that Major and Norman Lamont produced for Neil Kinnock and John Smith. Lacking a positive case for a fifth term, Downing Street have fallen back on raising the spectre of Labour’s threat to personal and public finances.
In 1992, Lamont introduced a new 20p rate of income tax, held the top rate at 40p, and increased personal allowances in line with inflation. He was daring Labour to propose they’d raise taxes to finance their proposed spending increases. His opposite number obliged by pledging to increase income tax and national insurance for higher earners. ‘Labour’s tax bombshell’ was born.
Similarly, Hunt’s decision last week to finance tax cuts with the unexpectedly large headroom granted by the OBR was not only designed to keep the usual suspects on the backbenches quiet for a day or two, but to open up some clear blue water between the Government and Labour – at the cost of pencilling in £19.1 billion in spending cuts for 2027-2028.
Despite the best efforts of Rachel Reeves, the Shadow Cabinet is awfully fond – not entirely unreasonably – of claiming both that public services are on their knees, and that an injection of cash is needed to fix them. For all Wes Streeting’s sage promises of NHS reform, any improvements Labour want to make will cost more than bashing private schools or non-doms can produce.
Yet Reeves and Keir Starmer are keen not to be seen as tax raisers. Reeves has ruled out wealth taxes and made clear her commitment both to getting debt falling as a proportion of GDP and to not borrow for day-to-day spending. In yesterday’s Sunday Times, Jason Cowley predicted she would soon announce she would not raise income tax, VAT, or national insurance.
So far, so Gordon Brown. But in learning from Smith’s mistakes in time for the 1997 election, the then-Shadow Chancellor went the whole hog and committed himself to the Conservatives’ spending plans. That was despite them being so rigorous that Ken Clarke hadn’t wanted to stick to them himself. Hunt may have some familiarity with this position. This is not something Reeves can do.
The Chancellor has thus challenged his opposite number. She can refuse to reverse his tax cuts, stick to his spending plans, and outrage her party. Or she can promise higher spending whilst keeping the cuts, and spend the next year being badgered by Hunt as to how it would be paid for. Or she can imitate Smith, promise higher spending and higher taxes, and give CCHQ an opening.
Unfortunately for Hunt, Reeves and Starmer have found two ways of circumventing his trap: first, to ignore it, and, second, to reduce pressure on the public finances through optimistic promises of economic growth. Whilst neither is without its problems, both have the virtue for Labour of leaving the Prime Minister and Chancellor looking too clever by half.
Patrick Maguire has explained the former. Starmer and Reeves are not looking back to 1992, but to 1980 – and across the Atlantic. Ronald Reagan wore down Jimmy Carter by asking Americans if they felt better off than they had four years before. After 14 years of Conservative rule and a record fall in living standards since the last election, Labour believe they just have to ask the same.
CCHQ may fume about unfunded spending pledges. But as the tax-take hits its highest for decades – and after Liz Truss and Kwasi Kwarteng singlehandedly spaffed any remaining Tory record of economic competency – the Conservatives trail Labour when voters are asked which party can be trusted with the economy or taxation. Starmer and Reeves have the benefit of the doubt.
Nevertheless, they are still keen not to give a volatile electorate any reason to distrust them. Hence their other ointnment for our ailing public finances: growth. Through government investment in clean energy, infrastructure construction outside of London, and a building programme of planning reform and New Towns, Labour hopes to improve our abysmal post-2008 productivity growth.
Equipped with these two stock responses, Labour hopes to bat out the time until the next election without having to answer too many difficult questions. If the heat does become too much when the Tories take a break from punching each other, they can scrap Ed Miliband’s moribund pledge of £28 billion a year for green boondoggles which Reeves has already punted into the long grass.
When in office, one assumes Labour thinks they can blame any hard choices on their inheritance from the Tories. We have five times as much index-linked debt as Germany. Paying interest on that is a reality that any Chancellor must confront. Since the Conservatives have shown an inability to reduce spending in recent years, taxes will rise under either party.
Then again, the British do have an unfortunate habit of claiming they are willing to pay higher taxes up until the moment they are asked to do so. If Labour’s growth plans fail to fire, they risk courting the wrath of voters they are promising not to tax. They might wish to be Reagan. But they are more likely to be another George H. W. Bush.There are worse fates, I suppose.