Let us begin by congratulating the government on investing for the long term in areas like tech, green energy, rail, and housing. For too long we have suffered from vote chasing short term thinking.
The benefits from these major infrastructure projects are unlikely to be enjoyed by this Labour government, even if it gets two terms in office.
So, what is the assessment of Rachael Reeves as Chancellor after her first year in office? I’m afraid it has not been impressive and will always be marked by the U turn on winter fuel allowances. One mistake followed another. Strategically Labour made the error of putting itself in a straitjacket with its pledge not to increase Income Tax, VAT or National Insurance before an election it was certain to win. Then we are told the horror of finding a £22bn blackhole panicked the Chancellor into leaving pensioners in the cold last winter. Panic again after the Frodsham by election has led to a U turn which is damaging for many reasons. It is currently unfunded, fuelling the rampant speculation that there will more tax rises in the autumn. It will be complex to administer. It has energised the left of the party who now think Reeves can be pushed back on welfare payments and two child benefit. Finally, I don’t think voters will quickly forgive a move where the political damage far outweighed the savings. En passant, when do you think, any party will suggest cutting the triple lock for pensioners when, in fact, it is needed to address the growing generational disparity between old and young?
But we have to look at the wider picture in assessing the performance of Chancellor Reeves. Her belief that long term investment, getting benefit recipients back to work and creating a healthier nation will all help with growth is admirable. So is the easing of the Treasury rules which always favoured investment in the South East. Let’s hope spades do at last hit the ground on TransPennine and Northern Powerhouse Rail. The North is heartily sick of these schemes being promised for the last ten years, with little improvement.
So the jury is out on Chancellor Reeves as she prepares for a summer of “cruel tax speculation”, the words of the impressive Shadow Chancellor Mel Stride, who I thought might have pointed out that the Chancellor’s ability to target infrastructure to specific places would not have been possible with us in the EU without Europe wide tendering.
The near certainty of further tax rises is because the latest growth figures are poor, the cost of our national debt is increasing, Trump induced global uncertainty and the government repeatedly giving money to the NHS and public sector workers before vitally needed productivity improvements.
And it won’t be just central government coming after more tax. Councils are being left with the ever-mounting cost of elderly and childcare, so will need to increase local taxes by at least 5% next spring.
In her Spending Review statement, the Chancellor often by passed the Tories to acknowledge Reform UK as the government’s real opponents. Nigel Farage’s economic plans are shot through with uncosted promises but the disillusioned public may not care.
By the Spring they could face a choice between a Labour government taxing more with few signs of immediate benefit, an ineffective Conservative Party and Reform UK claiming to have found vast spending waste in the councils they control.
