Of the £21.9 billion ‘black hole’ in the public finances that Rachel Reeves claimed to have discovered yesterday, £9.4 billion of it came from her decision to increase pay by 5.5 per cent for various public sector workers.
For all her lamentations about Tory duplicity, the Chancellor’s speech was merely an extensive exercise in providing cover for her decision to rob from the Conservative base to pay her own – wealthier pensioners for public sector workers – and to justify coming tax rises that she always intended to introduce, but was too scared to mention to voters three weeks ago.
Coming as she approved a 22 per cent pay rise for junior doctors, the absurdity of Reeves claiming to be hobbled by Jeremy Hunt rang hollow. As punchy as our pugnacious new Chancellor was, why should anyone trust her ever again? She pledged fealty to the OBR and promised no tax rises outside her manifesto. Yesterday, she ignored the former and paved the way for the latter.
Reeves will claim it would have been impossible to ignore the conclusions of the independent pay-review bodies. But her decision to stuff the junior doctors’ mouths with gold shows how political such choices are. How can she find the money to buy off the BMA, but not to abolish the two-child limit? Why isn’t there money to rebuild hospitals, but there is £8.3 billion to shut Ed Miliband up?
Other alledged holes were either based on increases in spending that the previous government did not expect – such as an increase in asylum spending based on higher numbers – or that Labour happily agreed to, such as cuts to national insurance cuts and a £3 billion bung to Ukraine. Expect those asylum costs to continue surging, especially with any deterrent now gone.
We are not blameless. The Conservatives and Labour both had Paul Johnson pulling his hair out with a veil of silence over unfunded spending promises. March’s Budget left a projected shortfall of £10 – £20 billion in unprotected departments. Was Hunt ever really going to make those cuts? Reeves certainly wasn’t. Perish the thought of not forking out £11.6 billion for ‘climate aid’.
As night follows day, Labour were always set to put up taxes by far more than their private school fee raid. We will have to wait until the 30th of October to learn the exact details of the Chancellor’s expected trifecta of hikes on capital gains, inheritance tax, and the pensions of the better off. Until then, turn to Robert Colville for why that will leave Reeves shooting herself in the foot.
As the jolly sort of chap kept awake at night by worrying about the welfare’s states sustainability, I cannot complain when a Chancellor actually cuts spending. Can our Winter Fuel Payments regime be justified when one in four pensioners are millionaires? How many tears should be shed for scrapping what Fraser Nelson brands Boris Johnson’s “inheritance protection scheme”?
If Reeves wants to expose us as the party of pensioner appeasement, it is our fault for devolving into it. The low-hanging fruit of the Triple Lock remains to be plucked; there will be no more hacking away at national insurance for no political benefit. But what rankles about the Chancellor’s speech is the naked duplicity: the explicit hope that the electorate can be taken for fools.
By all means, look the voters in the face. Be honest about the unaffordability of our current entitlements regime in a country hamstrung by low growth, an aging population, and a darkening international horizon. Someone will have to in the next decade. It may as well be Reeves.
But what she should not do is co-opt the civil service into the fiction that she has not seen figures that she happily acknowledged were publicly available, in the support of decisions that she had always intended to make, but was too frit to outline to voters. Read her lips…
In under a year, pearl-clutching about winter fuel payments has turned into cutting them, with no obvious regrets. For all her desire to empower the Office for Budget Responsibility, Reeves is acting in the grand tradition of Gordon Brown, leaning on the Treasury to give her the figures required to make the statement she wants. I didn’t expect to be vindicated quite so quickly.
Hunt was right to point out that Reeves’s claims contradict the spending estimates she has presented to Parliament within the last fortnight. Having a Shadow Chancellor who had access to those figures this same month is something of a plus. Yet for all Hunt’s ability to point out his successor’s artifice, every statement he makes comes with Mandy Rice-Davies rules applied.
Reeves has exposed the futile truth of our politics: that in Britain we have two social-democratic parties that exist to perpetuate the welfare of their respective core votes. She hopes that paying the union Danegeld will reward their contributions to Labour’s victory and guarantee her ministers a quieter life. Those charged with paying for it have long since been written off as Tories.
Our cheery slide toward national bankruptcy will continue unimpeded. Reeves will find herself cutting and levying more in coming years as the tax base shrinks, Angela Rayner’s warm words about housebuilding fail to deliver 2.5 per cent growth, and the next set of international crises turns her spending plans to mush. Things can only get worse. How many times do I have to say it?
Being in opposition, our only contribution will be to impotently moan “I told you so” from across the Commons. Fortunately, Labour government have a happy tradition of entering office, overseeing fiscal crisis, and being booted out a half decade later. Keir Starmer’s current trajectory more likely mirrors that of Clement Attlee or Harold Wilson than Tony Blair. Therein lies complacency.
The next Conservative government is almost certain to inherit an even bleaker economic situation than that Reeves has been cooking up. Tories have made much of how much worse things were in 2010 than today. But it only takes China’s looming invasion of Taiwan to precipitate another global depression, added to another half decade of stagnation and Labour profligacy.
Reeves signalled yesterday what her priority will be as the choices get harder: protecting public sector incomes. We shouldn’t pretend that we would not treat pensioners in the same way. But we can call her behaviour out for the nonsense that it is, and be honest that our public spending model must change. Leadership candidates should say that, not push more fluff about party unity.