Rachel Reeves’s warmly received Labour conference speech contained the headline of an argument—but not an argument.
The “warmly received” bit is worth registering, because amid this bizarrely terrible time for a new government, bringing the Labour tribe to its feet was not quite the given it should be. Deft deployment of symbols, such as VAT on private schools for “the few”, from the first woman chancellor in “800 years of the office” saw to that. So, too, did emphasis on the two seriously distinct policies that this government has: liberalising planning laws and stronger rights for casualised workers.
At a moment when voters far away from the conference bubble are looking at images of their political leaders and thinking “I wonder if they’ve paid for that suit”, and at a point when so many people are—reasonably or otherwise—outraged at Reeves’s own move to means-test winter fuel payments for pensioners, it is reassuring to see that Number 11 is after all occupied by a politician capable of a political touch.
Clearing this first hurdle, however, is not enough to get growth in the economy—or arrest the government’s falling stock. Next month, Reeves is going to raise taxes for some and when, perhaps after a day or two of confusion, these losers figure out who they are, there are going to be howls of anguish.
Despite her specific and silly insistence on stretching the definition of the “working people” she vows to protect to include Additional Rate Taxpayers (earning over £125,000), identifiable constituencies of real people—some of them working, and some not—will soon have to cough up more. Large pensions savers, almost certainly; landlords, perhaps; and shareholders, probably. This will be done in the name of avoiding, as she promised, any “return to austerity”, although if this is true at all, it will be so only in a narrow technical sense. As things stand, overall public service spending per-person is stuck on the floor, which means that away from the protected departments such as health and defence, the big squeeze will likely continue for as far as the eye can see. Vulnerable claimants of disability benefits are getting nervous about what Reeves has in mind for them.
The new chancellor cannot be blamed for the battered state of the public books, even if the sudden shock she says she experienced on opening them up and discovering hidden horrors strikes the experts as overdone. But whether her surprise at the mess is synthetic or not, the responsibility for dealing with it is now hers. The winter fuel saga has already tested to destruction the assumption that every painful choice can simply be blamed on the irresponsible Tories.
This is where a real argument would come in handy, an argument that pinpoints the predicament the British economy is in and explains precisely how the choices that are now to be made will lead us to a happier place. Reeves gave us the headline for that argument: “growth is the challenge, investment is the solution”. Unfortunately, we were left none the wiser about how she’s going to make good on this mantra in her budget.
As we’ve been led to understand it thus far, Reevesian economics (“if we cannot afford it, we cannot do it”) is a wilful inversion of Keynesian economics (“Anything we can actually do, we can afford”). If Reeves really wants to make investment the answer to stagnation, she needs to move at least partly away from budget-balancing respectability and towards deciding that the resources for that investment must be found, since that’s the only way to grow the economy to the point where the debt problem becomes easier to handle.
Rhetorical commitments to “iron-clad fiscal rules” don’t make this easy. But various technical moves could still help her to start the necessary shift: widening the definition of “investment” to include aspects of education; extending the time horizon under which debt is assessed; fiddling with the way her debt targets treat the Bank of England’s liabilities. Indeed, the bean-counters at the Office for Budget Responsibility have recently suggested that higher investment implies a more enduring expansion in the size of the economy than had previously been assumed.
So there are some open doors. But Reeves is going to have to push on them—and soon—if she wants to move on from “can’t do” budgetary housekeeping to “can do” economics.
