With Rachel Reeves coming unstuck is it time for a really radical approach to fixing the economy?
GILES DILNOT
It’s still ‘the economy, stupid’
This was an almost throwaway remark by a Tory party member at a Conference this weekend run by the Margaret Thatcher Centre, at Buckingham University. It was, however, spot on.
James Carville the American political strategist coined the original phrase in 1992 to describe the prime motivator of American voters.
It’s not only still true, but it also extends far beyond the States. Yes, UK voters want other things, and some of those are big priorities but the economy, at the most basic level of “do I feel better off or am I labouring under constant financial pressure?” is always there in voter’s minds when judging which party might change that.
It is stupid to forget it.
The central message of any party aspiring to govern, has to contain a credible and deliverable promise to grow the economy, and in a way that allows more people to feel more prosperous.
The word “feel” is deliberate. Aside from those who feel poorer because they are poorer there are plenty of UK voters who are relatively prosperous but feel the complete opposite, and think the immediate future is likely to be worse.
In that sense, politically, things look pretty bleak right now, since nobody is yet offering that message.
I’m repeatedly told, by the Conservatives and Reform that the work on detailed policy positions is underway but as of now we haven’t and won’t hear that credible and deliverable promise soon.
It’s not a criticism just a fact.
Then there’s Labour.
In charge for eight months and so far their handling of the economy could best be described by re-printing the Tories’ 1979 election poster “Labour isn’t working”. Labour’s mission for growth is having the opposite effect. It’s got to the point, when saying that out loud isn’t even politically biased – just a reflection of the evidence before us.
All parties, but especially the Conservatives, have contributed to a justified cynicism in the electorate such that they care less about what you say now, and more about what you do. I’ll come to the Tories, who have their own economic repair job to complete but ahead of Rachel Reeves’ spring statement this Wednesday, let’s just reflect on what Labour have said, and what they’ve done.
Even if you think they are – and plenty don’t – ‘fixing the foundations of the economy’ isn’t really the level of ambition I think voters are looking for. I want sound foundations, sure, but what about renovating, or even rebuilding the house?
It’s hard to think of a single Prime Minister’s Questions where a nasal repetition of the ‘£22billion black hole left by the Tories’ hasn’t resonated around the chamber in the hope that if the Prime Minister says it enough times people might think it’s true.
However, Rachel Reeves’ repeated public negativity about the state of the economy that preceded her first Budget – equally a game of ‘create some pain and shift the blame’ – became a self-fulfilling prophecy. Business confidence plummeted.
It didn’t recover after her Budget.
Labour said they wouldn’t raise taxes “on working people” and despite still claiming they haven’t it’s a sophistry few are buying into. What remains extraordinary to many, some in the Labour party, is that at the risk of upsetting whole groups of society it is not clear that many of the cash raising measures will raise the funds intended – and it appears Labour hadn’t spotted that problem.
Now, Reeves has lost her financial wriggle room, is constrained by her own rules, but has promised not to come back for more. Big spoon of nasty medicine now, and slowly – painfully slowly – it should all get better, was the messaging.
Well I have news – Wednesday could be another bad medicine day.
We read in the papers that there won’t be tax rises but there will be spending cuts, and one suspects deeper welfare cuts of the kind that Tories will quietly approve of and scares the horses on the crowded Labour benches. It’s remarkable that just eight months into this huge majority Government that Labour backbenchers on seeing the welfare cut proposals asked, “if we are doing this then what’s the point of Labour?”
Conservative leader Kemi Badenoch was canny in labelling this spring statement an “emergency budget”, because it isn’t – but it sure feels like one. However, as every Conservative should be acutely aware – Labour having problems does not equate to Tory’s winning.
There’s no spin, even from Liz Truss herself, that will convince many voters that her mini-Budget didn’t swerve the economy into a ditch. You can argue, and some have, that it didn’t exactly ‘crash the economy’, which got back on the road – but it drove the Tories reputation on economic management into a brick wall.
So the argument I’m about to make is going to make some people nervous. It shouldn’t.
The Conservative party need to remind themselves of the lesson the electorate taught them last summer, and the lesson Labour is unconsciously teaching now. Non delivery on promises gets you canned, and just watching the other side fall over in order to replace it is complacency.
I’m writing this in Buckingham University, where the Margaret Thatcher Centre is hosting its annual Freedom Festival. There have been a number of Thatcher themed events this year marking 50 years since she became leader. Perhaps inevitably there’s been a lot of talk about what of her legacy the Conservatives should copy or revive.
One of my first articles for this site, focused on when Sir Keir Starmer first nestled into Downing Street and performatively – and a little petulantly – had the Lady’s portrait moved. I looked at her legacy in the current climate and argued, as many have, that it’s fine to listen to her greatest hits, but Kemi, and the party, need to write new music of their own, and if some songs have a Thatcher theme or flavour, that’s fine – if that tackles the problems of today not 1975.
This weekend I’ve changed my mind.
Rather, I’ve changed one aspect. The Conservatives would do well, indeed for voters I think they’ll have to, to copy one thing she did in opposition. The policy forums need to look at the world and the problems of today, look at how the Conservative party has struggled to tackle them with possibly outdated prisms, see how hard it’s become to drive political will in Whitehall and find radical – even eyebrow raising – solutions.
Almost a “goodbye to all that” of government by received wisdom.
We know the electorate are in the market for it they’re just not yet convinced the Tories can and will produce it. ‘Wait and see’ is a tricky line to hold on policy, but the reality is we aren’t going to get the full package yet. When it finally comes it’s going to need to be pretty big and bold, because voters, and indeed members aren’t in the mood to be short changed or underwhelmed.
As Rishi Sunak found after the 2023 Party Conference, the last response you want when you unveil new policy is “is that it?”
Thatcher focussed particularly on the economy because she knew how bad the problems were and how everything flowed from fixing them – and because she wasn’t stupid. As this weekend’s event has shown, talking to attendees, it’s clear they want the Tories to do that again and are urging them to be as bold – if not bolder.
For the Tories, and the economy that’s actually not stupid either.
This article (With Rachel Reeves coming unstuck is it time for a really radical approach to fixing the economy?) was created and published by Conservative Home and is republished here under “Fair Use” with attribution to the author Giles Dilnot
See Related Article Below
Rachel Reeves’s growth-sapping taxes can only get worse
The economy is already juddering but the Chancellor’s biggest changes are still to come
LIAM HALLIGAN
These are all policy-related reasons why the UK economy has stalled – as the Bank of England acknowledged, as it recently halved its 2025 growth forecast from 1.5pc to 0.75pc.
“There’s no question the increase in the cost of employment does have an effect,” Governor Andrew Bailey observed. “And we’re very focused on how that increased cost of employment is going to pass through,” he added, indicating that Reeves’s increases in firms’ costs would also likely push up inflation.
Now we learn the Office for Budget Responsibility, the official fiscal watchdog, is also set to slash its estimate of UK growth this year – from 2pc to around 1pc, when the figures are issued alongside Reeves’s statement on Wednesday.
Already, lower-than-expected growth over recent months, implying weaker tax revenues and more government spending on benefits and other support measures, has begun to pull the public finances apart, making a mockery of previous fiscal forecasts.
That’s why the Government borrowed, for example, £10.7bn in February according to official figures published on Friday, no less than £4.2bn more than predicted by the OBR last October. A simple extrapolation of recent monthly fiscal overshoots suggests that by April, borrowing for the financial year as a whole could be £151bn – £23bn more than forecast by the OBR last autumn.
Just that additional borrowing is equivalent to levying another three pence on the basic rate of income tax. That’s one reason why the UK’s 10-year gilt yield – what the Government must pay to borrow for a decade – has risen by around 0.75 percentage points since last summer and has, in recent months, been consistently above 4.5pc.
That’s significantly higher than the peak reached at the height of the “mini-budget crisis” under Liz Truss’s leadership back in 2022.
The Telegraph: continue reading
Featured image: twitter.com
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Rachel Reeves is struggling to make her sums add up ahead of Wednesday’s Spring Statement. But while the Chancellor is keen to blame others for the UK’s weak public finances, and the resulting tough spending decisions and inevitable political fallout, she herself shoulders a sizeable share of the blame.
Back in October, after her party took office in July, Reeves unveiled the first Labour budget in 14 years. It was statist and punitive – upping government spending by £70bn per annum on average during this Parliament, financed by £30bn of extra state borrowing and £40bn of additional taxation each year.
Last year’s total tax take was around £830bn – so Reeves has already hit the UK with a 5pc hike in taxes, hammering growth and making the public finances even worse. But on Wednesday, lacking a genuine grasp of economics and blinded by ideology, she may well make the same mistake again.
The Tories left office with the UK tax take approaching 37pc of national income – the highest tax burden in 70 years – with national debt already close to 100pc of GDP. So, the public finances were certainly in a bad way when Labour took over.
But at least the UK was growing. During the first three months of 2024, the economy expanded a buoyant 0.8pc compared to the previous quarter, managing a still decent 0.4pc growth rate during the three months to June.
Over the second half of last year though, following Labour’s election victory, and particularly following Reeves’s tax-raising Budget in October, the economy flatlined. And on the latest figures, GDP contracted 0.1pc during January, instead of growing 0.1pc as expected, driven in large part by a decline in manufacturing and less oil and gas extraction.