‘You know I’m not sure that’s going to wash with people’
In the days leading up to the Budget – which we can assume will be a very tricky time for John Healey – I’m going to predict that the words above are the general response the morning after it.
John Healey wants to do a number of things. The Prime Minister wants him to do a number of things. The Conservatives want both of them to do things. And the truth is he either can’t do what his side wants, and his own side won’t let him do what Kemi Badenoch will tell him he should.
The cold facts that what we leave behind for others and what others inherit from us is not just an argument about tax or family farms. Not anymore.
It’s strange how much it now feels a distant memory but when Labour came to power we can all remember the first heady days of the new Labour Government; over confident, over ‘bobbed’, and overheard wheeling out their first – and financially – largest fib.
Remember that ‘£22bn black hole in the public finances?’
That epic chasm in Tory accounting that Rachel “we won’t raise taxes on working people” Reeves unveiled immediately until she could get to her first budget and announce £40bn in new taxes”.
She spent that summer piling on the blame, with a trowel, a laying the bricks of a defensive wall from which to launch her massive tax rises in her first budget. Each brick stamped with “£22bn black hole” on it and ramparts flying flags with “the Tories did this” and “Never forget the Mini-Budget”.
It made sense politically and showed some nous (supplies of which seemed to evaporate very fast indeed) because she and Keir Starmer needed the country to accept all financial pain was their inheritance from the Conservatives – especially ‘Liz Truss crashing the economy with her disastrous mini-Budget’ and that their legacy to the country would soon be ‘the foundations of the economy fixed’, ‘no taxes on working people’ and ‘growth as their number one priority’.
That from the people without a plan, was the plan.
As Blackadder once said “There was only one problem with the plan. It was bollocks”
Excuse my language but Ben Elton wrote that not me.
The ‘Liz Truss Experience’ – as I find myself referring to that slightly strange seven week ‘trip’ we all went on but seem keen to forget – did not help people’s mortgages but – and it’s a big but – she didn’t actually ‘crash the economy’.
What she did crash was the Conservatives’ reputation for running it properly.
Her team didn’t pitch-roll either the press, the City or even her party. The Bank of England certainly didn’t help her but the real point is Labour didn’t inherited the economy from Truss, they took the reins nearly two years after she’d gone.
An it turns out there wasn’t a £22bn black hole. Just a gaping chasm in the previously holier than thou front bench’s honesty reserves. The most the OBR would ever agree to was around £9bn. Which is not great but as we’ll see numbers are relative.
Labour inherited interest rates a little over 2 percent, and the fastest growing economy in the G7, which to be fair was up against six other economies that were really properly struggling. The more they wheeled out the £22bn the more it turned from crushing mic drop on the already beaten Tories, to feeble bunker for a government wobbling within weeks.
Starmer’s time in office got off to a shaky start, stuttered in the middle and collapsed in disarray towards the end, taking Reeves with him. She cried a year too soon, but sympathy should be limited.
Think of John Healey. He has inherited a far darker prospect from the ‘previous Government’, this time one he himself was part of – right up until he resigned because the then PM and the Chancellor weren’t taking defence spending seriously.
With two weeks of furious logic bending to go in order square a circle Healey has been gifted by the predecessor he helped to bring down low growth, high youth unemployment, taxes holding back employment, taxes that angered large sections of the electorate, soaring borrowing costs and most of all a boss with a parliamentary majority unwilling to support cuts to spending, whatever meek noises he makes about it.
Oh and he still has to fund defence. As he promised.
The IFS has warned of a real black hole, not a slogan like ‘son of a toolmaker’ that gets tired only the third time you hear it, but an absolutely clearly identified black hole. Now the IFS is clear some of that can be traced to commitments in the last Conservative Government. It has certainly been exacerbated by the current one to a staggering degree.
It’s not a fake £22bn black hole but a yawning maw of a real £35bn one.
Yes, Trump’s activities in Iran have had a terrible economic knock on effect. I can accept that; in a way Labour never would about the economic effects Covid (when they wanted longer lock downs) and Putin’s activities in invading a neighbour in 2022. A war that seems destined to go on as long or longer than the Second World War.
In Labour eyes global economic shocks are legitimate and understandable excuses and pressures on a government, but all the fault of Tory economic incompetence when things are the other way around.
But if the IFS say Healey has to choose between tax rises, or spending cuts, and do so now, not brush it away with the ‘no news’ Budget they assuredly planned then this morning the IMF has handed him another blow.
“The International Monetary Fund has warned against unfunded giveaways to ease cost of living pressures before John Healey’s maiden Budget. A fortnight before the Chancellor’s first major tax-and-spending event, the IMF downgraded its outlook for UK growth and warned of further price rises and job losses.”
Both Labour and Conservatives have tried the tactic of kicking tomorrow’s problems into the long grass, and that is most definitely a critic Reform could apply – rather than banging on about using lethal force to stop the boats which they seem to see not only (and correctly as a problem to be solved) but also the root of every single problem Britian faces.
As Kemi Badenoch will remind them, and reminded her party last week:
“Conference, the fundamental problem we have right now, is that our country is running out of money. Almost every other problem flows from this.”
The key inheritance she has had from the party that was beaten in 2024, she should and is showing she has, discard as unwanted. Don’t promise things in opposition you cannot reasonably deliver. Don’t look at National debt and think ‘it’s a problem but we’ll deal with it later’, and – and I thought this a useful warning from our columnist David Gauke – don’t let welfare cuts (which I am all in favour of) by the silver bullet to economic recovery that left think ‘wealth taxes’ are.
Badenoch doesn’t believe in silver bullets so any inherited should be passed on, to the policy bin, or redefined as: ‘part of a solution not the solution’
We all get tricky inheritances. The Lib Dems got Ed Davey, and seem keen now to give him up, very soon. The Greens are dealing with the legacy of Zack Polanski and an influx of antisemitic socialism on steroids, which as the lesson of Corbyn should have taught them, doesn’t work out well electorally. Reform have ‘inherited’ – which is one way of putting it – vast sums of money to get them into power, almost all of which is being investigated in some way. The Tories have inherited a baggage train of mistakes they made in Government which are still hard to discard despite Badenoch’s best efforts to do so.
But John Healey, staring at spreadsheets and projections in the bowels of the Treasury has inherited an economy his Labour predecessors have run about as well as they ran Government for two years. That is on them.
As will be only too apparent to him, as he tries to juggle the spending and borrowing urges of his comrades, and the realities of the markets, and borrowing costs, the rises in costs and deep reverberations of global fuel prices – inheritances are more than a little ‘taxing.’
He needs to come clean, and won’t want to.
Shakespeare said “”No legacy is so rich as honesty.”, ironically and over-optimistically it comes from “All’s well that ends well”