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Good morning. “Things will get worse before they get better,” Keir Starmer will warn today in his first major speech since becoming prime minister. I’ll have more to say on the speech in tomorrow’s newsletter (and yes, we’ll finish up our series on the Conservative leadership this week also). But for today, handily, many of the excellent questions you asked cover the topic of Labour’s plans on tax and spend.
Inside Politics is edited by Georgina Quach. Read the previous edition of the newsletter here. Please send gossip, thoughts and feedback to insidepolitics@ft.com
A question for you: how will Labour avoid breaking their manifesto commitments not to raise income tax, national insurance or VAT, and make progress on improving battered public services? Or, if they do end up breaking the manifesto commitments, how do you think they will, and what will the likely impact be?
Tom, London
This is, in many ways, the key question of this parliament. We can already see the contours of Labour’s current plans through what it has already announced. Its net spending is higher compared with the outgoing Conservative government (meeting the recommendations of the independent pay review bodies and making generous offers to try and end the junior doctors’ and train drivers’ disputes). But this is paired with spending cuts elsewhere (for example, to the winter fuel allowance) and tax rises.
There are two risks to Labour here. First, the plain answer may turn out to be “you can’t avoid it”, and that the party ends up in a situation where public services are no better in 2029 than they are in 2024.
The second is that its self-denying ordnance not to increase national insurance, income tax or value added tax means that it is largely looking at tax increases that people notice and/or may have economically damaging effects.
I don’t think that Labour is going to break its promises on national insurance, income tax or value added tax. But I think it would be much better off saying that the £20bn in cuts to national insurance that Jeremy Hunt handed out in his final fiscal events were irresponsible rather than trying to keep its promise of “change” (that’s “change” spelt “a general improvement in the condition of the UK’s public services and especially the NHS” in the eyes of most people) while cutting public spending or finding a bunch of other wheezes to get money, all of which run the heavy risk of being economically and politically harmful.
I think the Conservatives would make a lot of noise, but that would trap them in the worst possible position ahead of the next election; namely, by arguing that Labour’s inheritance was great (most people strongly disagree) and that the public services in 2024 were in good shape (most people strongly disagree).
That said, this is the worst kind of prediction, because it is non-falsifiable. Labour will, as Chris Giles sets out in an excellent column, be sticking to its pledges on national insurance, VAT and income tax.
Given that fiscal policy seems likely to be one of the government’s biggest challenges, and will frustrate many MPs and ministers, how likely is it that Rachel Reeves’ position will come under pressure before the next election? What would it take for her to come under serious threat?
Andrew
A chancellor’s position is almost always under threat if the economy in bad shape and/or they don’t have money to spend on public services. There are exceptions, such as Alistair Darling, whose job was made more secure and whose historical reputation was established because of his decisions during the global financial crisis.
In both 2012 and 2016, when unpopular measures in George Osborne’s Budget put the Conservative government under considerable pressure, the then chancellor would have been under “serious threat” if not for his close political proximity to David Cameron.
The guarantor of Osborne’s position was always that Cameron was the standout Conservative politician of his generation and there wasn’t an upgrade on him available within the ranks of the parliamentary party. I don’t think that you can make this argument quite so categorically with Keir Starmer and the Parliamentary Labour party, but it’s really difficult to remove a sitting Labour leader, so it’s basically a wash.
A similar dynamic means that, however difficult, unpopular, socially painful and politically rough the new government’s Budget will be, as long as Starmer judges that his political project is best served by the presence of Reeves in the Treasury, she is not going to come under serious threat. Nonetheless there is going to be an awful lot of stormy weather over spending later this year.
When politicians and journalists talk about the relative decline of the UK over the last 15 years (dreadful NHS waiting times, high tax burden, high immigration etc) why is there no discussion of the demographics of the UK having declined over this period? Surely this is the clearest explanation for a lot of voters’ gripes (particularly high immigration). I’m often baffled that this rarely seems to feature in the popular discourse.
Ned, London
I think the answer is a combination of political calculation and denial. Starmer and Reeves judge now, probably rightly, that their political prospects are best served by blaming their challenges on the poor decisions made by their Conservative predecessors. Cameron and Osborne judged, rightly, that they were better served by doing so in 2010.
A government that talks frankly about our ageing population, the damage that the financial crisis did to the UK’s economic model and the additional headache of Brexit would be conceding that it does not control events, and that some of the decisions made by British voters have worsened matters.
The other reason is simply that politicians often don’t like to admit this to themselves. You can test whether someone is a good minister by seeing if they want to govern for the times they are in, or act out the fantasies they had which drove them into politics in the first place. As chancellor, Rishi Sunak did govern for the times he was in — he raised taxes to keep the promises that Boris Johnson had made in 2019 and presided over a high level of immigration. As prime minister, he did not. The sympathetic reading is that he tried to do the right thing, was repudiated by his party for his troubles and he never felt he could risk doing so again. The unsympathetic reading is that he preferred to lose himself in fantasies about the summer of 1987 than do the actual hard yards of governing.
What Starmer wants to land in our minds with his speech today is that he is doing the hard yards. But how we judge that will not really be shaped by what he says but by what the government does, particularly in that all-important budget on October 30.
Now try this
This week, while writing my column, I listened exclusively to Desireless’s 1989 record François, best known for its fantastic opening track, the hit single “Voyage voyage”, but frankly there isn’t a single bad song on it.
Top stories today
Got the message | The government is set to extend a key hardship fund to help struggling households in England, as Rachel Reeves comes under growing pressure to soften her plan to axe winter fuel payments for millions of pensioners.
Going down | UK shop prices have entered deflation for the first time in almost three years as retailers discounted summer stock on the back of poor sales and bad weather, in a boost to households after a long period of high price rises.
New workers’ deal raises questions | Businesses and unions say they are in the dark about when the Labour government will bring in new measures intended to tilt power from employers to workers. The “Employment Rights bill” expected in October will only lay out the bones of the plan.
Camp KPMG | KPMG has won a UK government contract worth up to £223mn to train civil servants, the second-largest public sector contract awarded to the Big Four firm and agreed before the Treasury set out plans to drastically reduce Whitehall’s reliance on external consultants last month.
‘Mistake’ | Keir Starmer has cancelled the appointment of one of Britain’s top generals as the national security adviser, in a move that senior civil servants fear is designed to pave the way for a more politically loyal candidate, the Guardian’s Kiran Stacey reveals.
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