Liz Truss or George Osborne? For Rachel Reeves, neither is exactly her political lodestar. From a Labour perspective, the former moved far too fast with her 'mini-Budget' and in doing so sparked a run on gilts. In contrast, the latter slowly strangled the UK economy with cuts to capital spending and fired the starting gun on a precipitous decline in public services. Yet, as the Budget – by far the biggest moment of this parliament – approaches, the chancellor appears stuck somewhere between the two.
At Treasury questions this morning, Reeves stated (and not for the first time) that growth was "the number one priority of this government". So far, so Trussian. But in virtually the same breath, the chancellor repeated the £22bn fiscal blackhole she says was left to her by the previous government, an inheritance Labour likes to claim is the worst since the Second World War. That all sounds eerily Osbornite.
From a strictly communications perspective, Labour is right to exaggerate the fiscal situation. First, because the fiscal blackhole is real, not imaginary. And second, the party is pushing against an open door. A recent Ipsos poll found that two-thirds of the public believe Labour's claim that the economic problems facing Britain are worse than the Conservatives admitted when they were in office. More than half accept the claim regarding this being the worst set of economic circumstances since WWII.
The central challenge instead is what Labour actually does with that public understanding over the next five years. Most obviously, that involves cutting NHS waiting lists, getting the police to show up at crime scenes and building more houses. In other words, delivery. As Tony Blair put it in an interview with The Observer's Andrew Rawnsley over the weekend:
“It’s always the same thing. The challenge of democracy is delivering its efficacy. The reason for the rise of populism is all to do with the fact that people don’t believe governments are delivering for them.”
But delivery – let's face it, a combination of money and reform – will be made even tougher by the immediate fiscal challenge. The temptation for Reeves will be to find instant savings by raiding capital budgets and cutting infrastructure projects, as Osborne did in the 2010s. Of course, the problem with such an approach is it hampers economic growth, which if you recall is this government's top priority.
Tax rises can plug some of that gap, but action on capital gains, pensions relief and inheritance tax will not raise as much as the major taxes and also threaten to tarnish Labour's apparent aim of attracting foreign direct investment and the general pro-business schtick Jonathan Reynolds had turned into an art form.
Really, I ought to come up with my own conclusion, about Truss, Osborne and Reeves charting her own course. But instead, I'll leave you with the words of the doyen of economics journalism, The Sunday Times' David Smith, who sums it up better than I ever could:
"The government is looking through the wrong end of the telescope. If the priority is growth, that means growth-generating tax reforms, not just looking for revenue down the back of the Treasury sofa. It also means prioritising the policies and the public investment that will provide the stronger medium and long-term growth targeted by Labour. Otherwise, by the time we get over this autumn’s promised pain, it may be too late to stop the economy sinking back into stagnation."
