People often tell me that I am wrong about Labour. They say that once it is in office it will deliver everything that I want. I assure them that, based upon what they say, it will not. And now I know that is true. That is because Rachel Reeves has an article in the Financial Times this morning that confirms every worst fear that I have.
As she says in the article, when setting out her priorities:
First, I will never undermine our economic institutions. It was the Labour government that gave the Bank of England independence and I will protect it. It was a Conservative chancellor that established the Office for Budget Responsibility and I will strengthen it.
Let me be blunt about the Office for Budget Responsibility. It might best be described as the Oxford politics, philosophy and economics degree, brought to London.
As regular readers of this blog will know, the Oxford PPE degree has made a greater contribution to the decline in UK politics than anything else over the last 40 or so years. Amongst its many failings is its absolute dedication to formulaic neoliberal economic policy of the type that delivered the global financial crisis in 2008 and austerity since then.
Rachel Reeves is a PPE graduate. Of course, she will support those policies in office.
If anyone was in doubt, she also says in the article:
We will guarantee in law that any government making significant, permanent tax and spending changes will be subject to an independent forecast of its impact from the OBR.
This is, of course, a dig at Liz Truss. I understand that. But what it also does is guarantee that Labour will do nothing to upset those with orthodox economic opinion. In other words, austerity will be written into its agenda from the start of every budget onwards, meaning that any prospect of enlightened policy has disappeared as a consequence.
Reeves also suggests that:
Second, I will never spend what we cannot afford. I will introduce a new set of fiscal rules. These rules will apply to every decision taken by a Labour government. We will not borrow to fund day-to-day spending and we will reduce national debt as a share of the economy. I am clear that these rules are non-negotiable. There will be no exceptions. As with our revised charter of budget responsibility, these rules will be put to parliament to back.
In that single paragraph, Reeves has boxed herself into an impossible economic situation, given comments that she has already made.
She has to balance her current expenditure. She has also, previously promised to not increase any other major taxes or to increase taxes on wealth. As a consequence, she guarantees that growth in public services can only follow growth in the private sector. That is the only option that she has left available to herself. However, any prospect of significant growth in the private sector is now unlikely. That is because growth in the private sector is now almost wholly dependent upon an improvement in public services to supply the healthy, well-trained and confident workforce that the private sector needs. Reeves's policy guarantees that the necessary expenditure to make that happen will not be incurred.
Secondly, the suggestion that debt will fall as a ratio GDP means that she is either dependent upon inflation to achieve that goal, which I think unlikely, or she is dependent upon growth to deliver that outcome. However, in a stable, noninflationary environment it would require significant investment for that growth to happen. Business is not delivering that investment, and so government should, but she has constrained her ability to deliver by making this single statement, and so, once again, she is promising the impossible.
Third, she has given herself no wriggle room. Whatever the situation, and whatever the need in future, she says that she will not fund additional activity by government. This is a quite extraordinary position for a Labour administration to take. It is, in fact, a simple recipe for disaster.
The making of that disaster is, however, inherent in another comment that she makes early in the article:
During my time as an economist at the Bank of England, I learnt a very simple lesson: your sums must always add up. Instability follows when that very basic truth is ignored.
That is, of course, an unfortunate reminder here that Reeves did work for the Bank of England. Given that they are the current agent for destruction in the UK economy, that is not something she should be shouting too much about, in my opinion. She, however, trumpets it as a virtue. In doing so, she shows that she has the mindset of the accountant or economist who thinks that they can manage using a spreadsheet.
Such people are dangerous. They know the price of everything, but the value of nothing. I have never met a person of this sort who can innovate. The only policy tool known to them is to cut. And, as Reeves implies, so long as their figures balance, nothing else matters to them.
Accountants with this mindset have been the curse of British industry, and the cause of our long-term lack of investment and failure to increase productivity.
Economists with this mindset can only deliver austerity.
Politicians with this mindset sell public assets, outsource public services, treat public servants with contempt, and presume that those dependent upon the government are a burden on their budget.
Reeves has laid out her plan for a nightmare five years of Labour government this morning. There is no other plausible interpretation to what she has said.
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My fear is that nothing much will change under Labour, and after 5 years the public will decide that it’s the only game in town and the Tories do it better. The MSM will undoubtedly assist in this conclusion.
Why do we not have any politicians with ambition? Or if we do, why are they unable to fire up public imagination?
We did have, Jeremy Corbyn. He might not have agreed with Richard on everything, but at least he was/is willing to listen. The establishment was so scared of him they hounded him out of office.
https://skwawkbox.org/2023/09/21/there-was-no-antisemitism-crisis-when-corbyn-was-labour-leader-he-just-intended-real-change/
I disagreed with JC over some major issues ie Brexit and PR both of which I think he was against or sceptical , though it is hard to find him make take a clear position on either. I do believe that he was probably honest and not anti-semetic and the way he was portrayed and vilified by the Labour party is a both abhorrent and an example of how first past the post works. Governments can move to the right providing they do not threaten the wealth and power of the wealthy , as Truss did, but it is very difficult if not impossible to move to the left. PR would not totally solve this but it would allow the views of people to be represented in parliament and would help stop the drift to the right. Corbyn had little chance and they won’t allow someone like him to lead the Labour Party again imo.
This is what the Conservatives are banking on. This is how the conservative manual of power works. So anything, say anything to stay in power. When your mismanagement fails so badly it is unsustainable however much you cheat or lie, then had the mess over to Labour to clean up the impossible mess. The conservatives know it will take years – probably decades – to repair the damage they have done in power; so they can trust in the weariness of the public in the slow clean-up; and they can sweep back into power as the post-weariness answer to the the public’s hopes, within one 5-year election cycle, typically. They then live off whatever the clean-up has managed to achieve in their absence from power and bungling, and destroy everything over the next f, 10 or fifteen years (however long they are able to con their way to achieving): until the whole cycle is repeated again; and again; and again; on the same wash, rinse, repeat cycle.
The Conservative/Tory Party have been the definition of government incompetence, at least since Bolingbroke. They have been living off guff for over three hundred years. It is guff the British people are never tired of hearing it seems; and paying the very expensive price of listening to it.
John, Labour fattening the Pig and the Tories then eating it is pretty much my view of the historical British economic cycle.
The only significant difference in my lifetime has been the intervention of Murdoch who demonstrated how you could exploit humanities worst traits to turn reality on its head.
I am still amazed that when Thatcher’s moronic experiment with monetarism destroyed 250 years of British manufacturing industry, the Tories with Murdoch leading the charge, were able to convince even intelligent well educated people that a country losing its most important source of wealth and security was a part of some mystical “natural” economic cycle.
We were all going to become designers and computer programmers, because, it was implied, lesser peoples like the Chinese and Indians just did not have the brains for such things,
Mind bogglingly, arrogant, stupid and racist. Just like now.
I quite agree that anyone expecting Starmer’s Party to behave like a Labour government if they get into office is going to be disappointed. They don’t even behave like a Labour opposition for heaven’s sake.
Starmer, like Blair before him, has his sights firmly set on winning Tory voters and having won them he will want to keep them happy with tory policies. Reeves is clearly entirely on side if not actually dictating the course.
I asked ChatGPT to write a letter to Rachel Reeves based on this blog post, which I copied in to my query. This is what I got:
Dear Rachel Reeves,
I hope this letter finds you well. I want to express my deep concern after reading your recent article in the Financial Times outlining your priorities for the Labour Party. I’ve long been skeptical of Labour’s ability to deliver on its promises, and your article seems to confirm my worst fears.
Firstly, your commitment to safeguarding economic institutions like the Bank of England and strengthening the Office for Budget Responsibility is troubling. The Oxford PPE degree, which you hold, has been associated with neoliberal economic policies that contributed to the 2008 financial crisis and years of austerity. It appears that you may be inclined to continue these policies in office, which is deeply concerning.
Your pledge to subject significant tax and spending changes to an independent forecast from the OBR further solidifies the perception that Labour will adhere to orthodox economic opinion, effectively locking in austerity measures. This eliminates the possibility of enlightened policy and progressive changes.
Additionally, your fiscal rules, which prohibit borrowing for day-to-day spending and demand a reduction in national debt, create an economic straitjacket. Balancing current expenditure while avoiding tax increases on wealth and major taxes leaves little room for meaningful public service growth. This contradicts the need for public services to support private sector growth, creating a potential economic impasse.
Your insistence on not funding additional government activities in the future is a risky position for a Labour administration. It doesn’t allow for flexibility in responding to changing circumstances and needs.
Lastly, your emphasis on the need for sums to always add up, drawing from your time at the Bank of England, is a concerning viewpoint. Managing solely with a spreadsheet mentality can lead to an overemphasis on cost-cutting without considering the broader value and innovation needed for a thriving economy.
I believe that this approach could lead to more austerity and a failure to address critical issues facing our society. It is my hope that you reconsider these positions and consider a more balanced approach that prioritizes both fiscal responsibility and the well-being of the public.
Sincerely,
“Secondly, the suggestion that debt will fall as a ratio GDP means that she is either dependent upon inflation to achieve that goal, which I think unlikely, or she is dependent upon growth to deliver that outcome.”
This raises a really crucial issue. If you really wanted to reduce the national debt there are only three ways to do it. One, we can dismiss outright. Britain delivering a colossal and sustained trade/balance of payments surplus. Margaret Thatcher lived off North Sea Oil, and blew it on bad policies (that Scotland in particular is still paying for – but hey, London did alright). Britain has an endemic, unbridgeable trade deficit it is not going to turn round. The second is to cut spending drastically. The impact on the economy and living standards is catastrophic.
The third is inflation. Inflation is the fastest, reliable way to cut the national debt. The great power of this solution is that because of all the bad effects on everybody immediately; on the economy, on living standards, on a sense of stability, that the adverse impact disguises the benefits from a shrinking (real, not nominal) national debt, and the power of inflation to reduce it. The real conclusion we may draw from that is that the level of the national debt is far less critical than Conservatives and Neoliberals claim. They use the National Debt as a threat, in order to allow them to rip-off the public, at leisure by claiming they have no money to do anything – because of the national debt.
No, the National Debt is effectively part of M0, i.e. Base Money. The only way to remove Base Money is to cancel it via tax.
No, its broader economic significance as a capital ‘burden’ falls as the buying power of the currency it represents shrinks (over time, so not over the short term). It is not a matter of removing it, but rather its quantum significance as a hangover in the economy; over time, long term. The point here is really nothing to do with base money; it is a function of the fixture of the debt, compared with money’s future buying power. As the future buying power shrinks over time the scale of old debt as a negative factor also slowly falls. Think of it historically; if this wasn’t true Treasuries would require a different perspective to debt over time (given the timescales of bonds – historically, including perpetuals). Of course there are massive downsides to this, but that is another matter; including servicing the debt. The point was originally made, ironically: I think you missed it.
I think reality would catch up with her rather quickly if she were to be installed as chancellor. The country is going to require increasing levels of day-to-day spending to meet the legally-binding carbon budgets and where would the economic growth come from to cover that? “Borrowing” is inevitable.
I agree
She is setting herself up to fail.
I have always thought her to be macroeconomically illiterate, which she has now confirmed. It seems to me that she has, with her latest statements, also shown herself to be rather stupid.
“Accountants with this mindset have been the curse of British industry, and the cause of our long-term lack of investment and failure to increase productivity.” Exactly, Reeves’ policy is a joke.
As you say Richard, if the state won’t invest, it all has to come from the private sector. But we only got siginicant incvestment as a result of foriegn companies basing themselves here as a result of EU membership. Our own UK private sector was appallingly short termist, and and still is.
So how in the name of hell is this country ever going to get the resouces into the economy that it needs after 14 years of austerity if the state won’t spend it?
New new labour, continuity conservative, labour tweedledum following tory tweedledwee in our hopeless, useless pseudo-democracy. And no doubt Richard we’ll still be bombarded with the ‘you gotta vote labour’ trope from labour supporters.
Wonderful article, Richard. I wholeheartedly agree with you. My doubts about Rachel Reeves’ economic thinking were strong anyway, but that FT piece has only reinforced them.
I’ve been a Labour voter pretty much all my life, been a Labour Party member for almost as long (and even was a Policy Adviser – on Planning issues – in the 80’s, in the Kinnock era), but Corbyn ended all that. When Starmer came in, I ALMOST rejoined the Party, but just had a few doubts – over a whole range of policy matters. Those doubts have grown and grown – and your analysis of their Economic stance has finally put paid to any membership application.
Since Brexit, my political allegiance has slowly moved in the direction of the Lib Dems. Their (gently moving) position on rejoining the Single Market and Customs Union, has almost (again!) led me to membership thoughts, but I will certainly voting for them and recommending to all friends who might listen, to do that. Are you YET, heading in that direction?!
Where I live voting LD makes sense: Labour could never dislodge the Tories, but the LDs might.
OK, that’s fine as far as tactical voting goes, but my question mainly relates to your view on their economic policies – and in particular, how much you feel they are in ‘alignment’ with your current Tax change recommendations?
I think they are taking note of them based on feedback received
Richard,
Please send the letter.
The FT article is utterly crass, it reads like a Tufton Street produced policy statement.
Absolutely nothing about for example repairing the school building stock for the benefit of our young people.
What is the point of voting Labour?
It would be great of other people sent it.
Labour know what I think.
Does Reeves even have to acknowledge the letter if it comes from someone not in her constituency?
I don’t know
Ideally it would go to her at Labour
She only gives this on her website rachel.reeves.mp@parliament.uk
You can try sending it to your own (Labour) MP and asking them to ask Reeves for her response. If you don’t have a Labour MP, send it to the party and ask for a response from her. Actually you could try sending it via your own MP whatever their colour.
“I will never spend what we cannot afford” – almost identical to Osborne’s statement to the Covid Inquiry ” what’s the use of a Risk Register if you cannot pay for it”.
We cannot afford to defend ourselves or increase spend on supporting US miltary ventures, we cannot afford to bail out the banking sector like we did after 2007/08, we cannot afford to rescue LDI loaded balance sheets.
Hold on, we know she doesn’t mean this, so what does this platitude mean?
We cannot afford to react to existential risk, crikey we are done for!
While I agree, I’m not sure anyone will even remember, let alone care, about these promises in 5 years’ time.
Well, almost right. Remember, short-term memory loss is how British politics is conducted. It is its USP. Conservative and Labour’s joint credibility relies solely on the fact that nobody will remember their promises 5 weeks from now. Starmer’s new trick to avoid this, is to say nothing at all, about anything at all; and use that empty space as proof he is going to fix everything; presumably hoping everyone forgets the lack of content, but will vote for an amiable and sympathetic smile. Sunak’s ploy to is to remove his own policies as a triumph for honesty (that were never policies at all – but hey, who will remember?), and claim it is all Labour’s fault; in the implausible hope nobody will even notice they haven’t been in power for thirteen years.
There was widespread condemnation a few months ago when a psychopathic nurse killed and injured a number of babies. But public policies can also kill or injure children and adults. A number of avoidable deaths or harm are considered to be acceptable for the greater public good.
For instance, the 20mph speed limit in Wales was expected to “only” save about 10 lives a year (and presumably a few hundred injuries). However, a lot of people considered the added inconvenience unacceptable. Fair enough, but how many more deaths and injuries would they consider acceptable? Presumably most people would balk at running someone over every day they drove to work, but they need to define how many deaths or injuries to other people are a price worth paying.
Rachel Reeves or Andrew Bailey need to be asked to cost their policies in human suffering
A million children are said to go hungry every week
Underfunding the NHS causes thousands of excess deaths and misery.
Presumably the proponents of “fiscal responsibility” will argue that they are saving lives in the future, but it seems perverse to think that underfunding the health service today will be a future benefit.
They need to make a clearer case for the harm they consider acceptable today and how likely is the benefit they expect tomorrow
Good points
Johnson still hasn’t been penalised for saying “Let the bodies pile high” and doing exactly that.
The Welsh 20mph issue is becoming an illustration how modern politics works. A sensible suggestion, already in force during school hours near schools in England, impact already quantified, is being resisted by a determined campaign.
My sister, who lives near Llanwrtyd, is monitoring this. Considerable material was placed in the media by the rather right wing Tories, many false statements made, a petition was raised where there are suspicions of signature farming, all to the end of harming Drakeford and the Labour government.
Those in the countercampaign, already dubbed ‘treehuggers’ due to their opposition to megapylons proposed across the area known as the Epynt, are not getting air time or a lot of Labour support. We are seeing the failure of principled politics.
A very good point.
Oddly enough, the current Labour Party leadership make me think of Terry Pratchett, specifically one of his characters, “Bloody Stupid Johnson”, an inventor who had no beginning to his talents.
Whenever I hear Starmer make one of his inane contributions about the latest Tory atrocity, I tend to think, “Bloody Useless”. Keir “Bloody Useless” Starmer sounds about right for him.
However, I think our next Chancellor has gone one better so I’ll certainly be thinking of her as Rachel “Bloody Stupid” Reeves.
And yet, I’m going to have to vote for them at the next election! I hope I get doorstepped by the Labour candidate so I can point out how Bloody Useless their leadership are. I’ve actually just tried to search to discover who my local Labour Party candidate will be, but their website doesn’t appear to be able to help me. Have they even selected one? Surely there should be somebody in place by now? Bloody useless!
@Mariner
One of my nicknames for SKS is Sir Useless Woodentop, the non-strategic unpolitician, who seems bent (and how!! given his loose relationship to keeping to his word) on making morons look like Nobel prizewinners!
Good grief, HOW have we ended up with Tweedledum Sunak, who’s about as firm and trustworthy as a patch of quicksand, and Tweedledee Starmer, who’s Sunak’s twin in ust about every respect, given that both Cabinets, actual and Shadow, are stuffed with 3rd-raters (if that isn’t being too kind to that motley crowd of non-entities!)
I’m not one for conspiracy theories, but I could easily imagine somebody sitting in a secret underground lair, laughing villainously and stroking his fluffy cat whilst watching Sunak and Starmer at work…
Perhaps that’s what Murdoch has retired to do? 😉
Dear Rachel Reeves
I hope this letter finds you well.
Why have you STILL not yet read ‘The Deficit Myth’?
Sincerely
It has to be said Peter, it has to be said.
Every time I see Reeves on TV opening her mouth my heart sinks.
The spectre of debt hangs over this country like an all encompassing shadow or pall snuffing out the belief that we can solve our problems.
To see an opposition politician effectively making this spectre real is so disappointing. To see her than playing with the problems and doing nothing more that rearranging the deck chairs on the Titanic as it goes down is simply unforgivable.
The only satisfaction you can take from it all is that we know she and Stymied are totally wrong. We have to take what we can at the moment.
Have you seen who she is married to?
https://www.gov.uk/government/people/nick-joicey#biography
Used to be director general of DWP, now in Defra.
I wonder what her policies on agriculture will be?
“Defra group Chief Operating Officer and Second Permanent Secretary”?
When did we start aping business in civil service titles? I appreciate it’s what you do, not what you’re called, that matters, but “group chief operating officer” of a government department? Really?
Apparently, yes.
And you are right: it is absurd, but NGOs also do it now. The Ford Foundation calls it ‘professionalisation’. I call it being adopted by neoliberalism.
Good grief, what a combination!
Flat-earther economics in moronic PPE mode, matched to sociopathic policies on treatment of offenders and dissidents.
Clearly victims of what I call moronavirus, the virus that turns brains and consciences to moronic mush!
One of my Great Grandfathers was Inspector General HM Waterguard, none of this modern monkey business.
For those who didn’t see it when I first posted the link here, Reeves has had a full “manifesto” on the LabourTogether website since May.
Far more detail than the FT article – which means it’s even more clear what Labour will “bring” (huh!) to the economy.
https://labourtogether.uk/report/new-business-model-britain
Thanks
Would pay to view a debate between you and Reeves.
I think it unlikely