Reeves is desperately trying to pull the fuse out of her own petard
The received wisdom seems to have coalesced around a belief that Rishi Sunak suffered from a premature election. Had he been able to hold on a little longer, the UK’s brightening economic prospects, along with falling levels of net immigration, would have resulted in, if not a win, at least a slightly less severe drubbing.
Well, maybe. The Conservatives were so mired in the brown stuff by the end of the last government that it would probably have taken an act of God to flip a couple of marginals back their way. Nevertheless, it is becoming increasingly apparent that the election arrived way too soon for the Labour Party.
Sir Keir Starmer had a plan to win the campaign but failed to get out his protractor and set-square to draw up a coherent blueprint for government itself. Given that Westminster, like nature, abhors a vacuum, power is instead gravitating towards the Treasury.
What’s more, an election in early July opened up an ocean of time before the conference season and the Budget in which the new administration’s central (indeed, only) message – “will you just look at the state of the place!” – has started to take root and do real damage.
Shoppers and businesses have repeatedly heard that next month’s Budget will be “painful” and are bracing accordingly. Figures out last week showed that consumer and investor confidence are both falling sharply. Private sector activity is in retreat.
As the chairman of one of the UK’s largest companies told the Financial Times, the Government seems to be prioritising growth but simultaneously undermining all the levers of growth.
In her speech at the Labour Party Conference on Monday, the Chancellor, Rachel Reeves, attempted to extinguish the long-burning fuse of her own petard before she, the Government and the economy are all hoisted by it. Instead she accidentally pulled the pins out of a couple more grenades.
The Chancellor was right to point out that there is cause for some cautious optimism about the UK. But she didn’t dig too deep into the whys and wherefores beyond the fact that some grown-ups are now in charge.
Certainly an end to the political uncertainty and convulsions of the past few years is a prerequisite to an uptick in the nation’s fortunes (I’m pretty sure I heard the cheers emanating from Liverpool when Liz Truss posted a video on Monday to mad-splain her ill-fated Budget two years ago). But it is not sufficient.
Reeves was quite correct to declare that “stability is the crucial foundation on which all our ambitions will be built”, although Labour does seem determined to undermine its own mandate with internecine squabbles about the No 10 operation and an entirely avoidable controversy over the “freebies” senior ministers have received.
But among the more concrete reasons for cheer are the fact that the economy is growing (modestly), household consumption is recovering (gradually), inflation is on target (finally) and interest rates are falling. However, these minor details were glossed over by the Chancellor.
To acknowledge them, Labour would have to admit that the recovery was already tentatively underway before the election, that the Government’s doom-mongery since has been absurdly over-egged and that the prevailing pessimism is at risk of becoming a self-fulfilling prophecy.
It would also undermine her claims to have discovered a £22bn “black hole” in the public finances dug by the Tories that will necessitate all sorts of difficult tax and spending decisions to fill. In her speech, Reeves doubled-down on this position and said not taking tough action now would “pose risks for years to come”.
For a chancellor who claims to be the antithesis of George Osborne, she’s certainly taken a few leaves out of his rhetorical handbook. In 2010, he too employed the old “kitchen sink” tactic, arguing that the public finances had been left in disarray by the previous government, the national debt was on an unsustainable path and that he had been left with no choice but to make some incredibly tough decisions.
Reeves’s tribute act seems to be annoying those on the Left just as much as those on the Right. It hasn’t gone unnoticed that the Government’s first meaningful policy, a controversial decision to scrap winter fuel payments for millions of pensioners, only addresses the spending side of the ledger.
Dozens of Labour MPs abstained in a Commons vote against the cut earlier this month – a manageable revolt given the Government’s majority but a telling one given its youth.
Boos echoed around the conference centre in Liverpool on Monday when the party announced it was delaying a vote on the cuts until after Reeves and Starmer have both spoken.
This was the constituency of malcontents the Chancellor was seeking to placate with her promise that comparisons with Osborne should only be taken so far and there will be “no return to austerity”.
Indeed, she promised real-terms increases to government spending in this Parliament.
Which is all well and good. But, given that she has also promised an “iron-clad” adherence to the fiscal rules she inherited, this sent a pretty clear implicit signal about the ying to spending’s yang: tax rises are a comin’.
That’s unlikely to persuade consumers and investors to open up their wallets anytime soon.
Perhaps Reeves can produce a Budget that squares the circle that she’s boxed herself into. But at the moment it’s hard to see how that might be achieved in a way that doesn’t blow up her much-fabled, but so far contentless, growth agenda.
Six weeks to go. Tick, tick, tick ... Boom!?