I am aware that the Guardian is not always popular with readers of this blog. Nor is its economics editor, Larry Elliott, always the top pick of everyone here, even though I openly acknowledge our friendship. Despite both facts, I open with a quote from Larry, in this morning's paper:
The greater risk [to Labour] is that it wins an Attlee-style landslide but then doesn't know what to do with it. Growth might come to the rescue, but it might not. The danger for Starmer and Reeves is that they lock the economy into a new era of austerity that makes absolutely zero economic sense and for which there is absolutely zero political appetite.
Larry's suggestion that Starmer and Reeves might have, through the promises that they have already made and the commitments that they have given to big business, backed themselves into an economic corner where austerity is the inevitable outcome, is appropriate. The likelihood of this would appear to be high.
That Larry acknowledges that this is the consequence of Reeves having adopted an almost identical fiscal rule to that suggested by Jeremy Hunt for the Conservatives, is also appropriate. Identifying the source of a problem is always the first, necessary, condition for addressing and then resolving it .
So, the question to ask is whether Labour will eventually abandon its wholly inappropriate commitment to fiscal rules? Follow on questions obviously relate to how long it will take to do so, and how much damage it might have caused in the meantime.
If she was wise, and there is a massive assumption implicit in that comment, Rachael Reeves would know that the same argument that she is using to get Labour elected also provides her with the opportunity to abandon her own commitments once she gets into office. All she has to say , at the time that she presents her first budget, which is now expected to be in September, is that the mess that she has inherited from the Tories is very much worse than she anticipated during the election campaign because she has now seen the books. She could, as a result, make the immediate suggestion that as a consequence she will have to change tack, and her planned fiscal rule will have to change as a result.
It would require some political gall to do this, but presuming that Labour will, after the election, enjoy a significant political majority in parliament, the solidity of she could be increased by abandoning her pro-Tory and pro-austerity policies, then there could be no better opportunity for her to do this than in her first budget. Is Machiavelli would have it, if you are going to exert your authority when changing course, do so as soon as you can after assuming power, and make your first strike an effective one.
If I was Reeves, this is what I would do. And, when challenged about her inconsistency by the political commentariat I would, if I was her, resort to the age old political line, that when the facts change, I change my mind. All that she would need to say was that she was now possessed of more data, and that was the reason for the change of approach. it would be incredibly hard to impose a significant political punishment upon her as a result, so soon after a general election.
Presuming, however, that she will not have the gall to do this, as I think likely, everything then gets worse for her. U-turns always represent an admission of political failure. That would, inevitably, happen if she does not acknowledge the need to change her position in her first budget. If possessed of the facts she maintained her fiscal rule then the inevitable requirement that she change approach at some time thereafter when, as an absolute certainty, her plan fails to deliver the growth on which she preconditions all additional government spending, will represent an absolutely inevitable admission of failure on her part. Both the commentariat and the electorate have long memories for such things. I suspect it would also cost her the job as Chancellor.
So, what should Reeves do, given that, as Larry Elliott suggests, there is absolutely zero political appetite for a new era of austerity? She has to brace herself for one massive U-turn weeks after getting to Westminster, or set Labour on a path to failure.
It will be her choice, but I think we are already know which way she will go.
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Is there any evidence that Rachel Reeves understands anything about macro-economics and how to run a national economy? It seems that Labour have decided to combat any right-wing press about being damaging to the economy, by effectively being the same as the Conservatives.
Just now they have had to say they are not putting up VAT, because the Tories pushed that line last night, presumably because Labour had only explicitly said they wouldn’t put up Income Tax and National Insurance, so VAT was the last big tax unmentioned.
I think though we have already reached “Man bite Dog” level of MSM coverage:
https://www.devonlive.com/news/devon-news/dog-bites-chunk-out-devon-9312436
So far Ms Reeves has not given any impression that she and Starmer have a list of” in the back pocket ideas” to radically change economic course.
Agreed that change is the correct thing to do, I am not expecting it.
Regrettably I foresee a deluge of TB style initiatives.
“exert your authority when changing course, do so as soon as you can after assuming power, and make your first strike an effective one”
Exactly Richard. Spot on.
Exactly: I think that in 1997 New Labour really missed out the opportunity tot reform the welfare system when thay had such a majority and national goodwill behind them. There were some good initiatives, like Sure Start, but too many hard issues were left in the long grass.
Larry Elliott and Nils Pratley are a good team at The Guardian.
U turn early and hard is the right solution. Until a few months ago much of your Taxing Wealth report could have been implemented without breaching promises… but that time is past.
Labour needs to say something like “a functional NHS is essential for growth. Now we have had a close look we can see how grim things are. We have to do ‘whatever it takes’ to save our health system….”.
(Education, transport and housing need the same approach but politically, the NHS is the easiest sell.)
Well, there’s no way I’ll vote for Labour in this election. Reeves doesn’t have any ideas that would make sense in an economy based on the need to reverse global warming. She and Starmer both – it’s the Tory Party to which they should belong.
Reeves has painted herself into a corner. On the one hand its all “BoE independence” – on the other “grow the economy”.
But.
BoE is doing quantitative tightening & keeping interest rates high. So how does the economy grow in such circumstances?
(answer – it can’t).
But hang on… it’s…….”the magic economy tree” – aw bless all will be well – Reeves has Harry’s magic wand – one wave and everything will be fine.
It has to be something like that, cos I don’t think she will change her mind & in fairness those with Oxford PPEs have a 100% record of destroying the country.
Reeves (with her PPE) will be no different, her entire record shows this & will the Americans allow it?.
A century on, will Rachel Reeves be the Philip Snowden of our time?
(The Wikipedia biography of Philip Snowden is at https://en.wikipedia.org/wiki/Philip_Snowden,_1st_Viscount_Snowden)
Interesting idea…
Reeves like the vile Starmer is a Remedial Class politician expect nothing more than a chain of disastrous decisions if elected to office!
If Reeves had said “you will be better off under Labour but I haven’t seen the extent of the Tory **** ups yet and I won’t be a hostage to fortune”, she would have been fine. Why she feels she has to match Hunt in the competitive flagellation of the economy stakes I just don’t know.
In order to do anything in government, you need to be elected: that is Labour’s only thought at the moment. They have to persuade a largely economically illiterate electorate to give them a chance to govern. Whatever they say now doesn’t need to be economically sound (it isn’t). If elected to office, they can do as they please, in the same way the present lot have, but do things honestly and correctly, which hasn’t been the case for 14 years. Everything until then is noise and distraction, usually deliberate. The real Economics championed by this site are waiting in the wings and will surely come onto the stage when a new, different gov have power.
You are completely kidding yourself
The ideas discussed here are being totally purged fro the Labour Party and it will niot changte when in office – inless forced to do so by ‘events’ – which will happen
maybe a coalition will result from the GE and a new Lib/Lab agreement. That might be the least bad option.
Richard is 100% correct. The extent of purges in Labour, right down to branch level, are huge. Regions, almost 100% right wing officers, rule totally. This week we find the very right wing and nasty people on the NEC awarded themselves safe seats. Dissent is neither tolerated or possible given the level of scrutiny, down to individual historical dossiers compiled since Milibands election by the group behind Corbyns defenestration and Starmers rapid rise. When you destroy dialogue, you destroy innovation. When you elect apparatchiks, in this case already corrupt and compromised, you have timeservers and grifters, not innovators.
Agreed
One crumb of hope and imagination in her Mais speech was to promote a re-accounting of investment. If this was capitalised and the opportunity used to both boost investment and boost revenue spending , unblocking the bottlenecks under the tories, then there may be some glimmer of hope.
Or am I fooling myself? We’ll soon find out.
Richard, I agree with your negative assessment of Reeves. Though note she is already name-checking the Truss episode as explaining future policy shifts potentially?
I was just wondering (I am writing a book!) while you screenshotted McDonnells fiscal rules did you do the same for the Reeves version?
I ask because as I understand it those rules did allow for the £28 billion Green New Deal initially, but now she claims they don’t.
Sorry, I did not