In this morning's video, I suggest that it would be great to think that Rachel Reeves might go down in history as both the first woman to be Chancellor and as a great Chancellor. The first is hers by right. But she is going all the wrong way about claiming the second title.
The audio version is here:
This is the transcript:
Rachel Reeves seems determined to make a mess of her Chancellorship. I wish I didn't have to say that. I honestly do really wish that was not the case. I would have loved it if Rachel Reeves had arrived in office and done all those things that I would have liked a Labour Chancellor do, like announcing that she was going to remove the two child cap, for example, to reduce inequality.
She could also have announced that she was, after all, going to fund the Green New Deal, and have found the money to do so, which would not have been hard, because it's readily available.
She could also have told us that she was going to raise taxes on wealth from day one of the Labour government because it was necessary to tackle inequality, and it was obviously going to have to happen anyway, so why delay?
But she did none of those things, and now she's digging a bigger hole for herself.
There are two things that are causing me concern at the moment. The first is that she is investigating the creation of a new private finance initiative funded project to build a new Thames crossing somewhere in London.
This, of course, is in itself problematic. What we have known from 14 years of Tory government rule is that London has been over-invested in when it comes to infrastructure projects and everywhere else in the country has been under invested in. What a surprise, the consequence is that there has been a relatively booming economy in the southeast of England and the rest of the country has suffered. And now she's going to perpetuate the problem by doing her biggest investment project to date in London.
But it is the private finance initiative aspect of this that worries me the most. Nine billion pounds of private money is apparently going to be invested in this project. If there's £9 billion of private money available to invest in this project, and that will all be in the City of London, then there's £9 billion in the City of London that could be deposited with the government to fund this project via the issue of new government bonds as well. That would be just as easy, except for one thing. The cost to the government would be significantly lower because private finance borrows at much higher interest rates than the government, and therefore, if the government is going to outsource the funding to the private finance initiative, it will pay much more for the creation of this project than it needs to.
The last great exponent of PFI projects was Gordon Brown, and he frankly did leave a disaster in this area, which is still being mopped up because the costs of many of the projects signed during his era as Chancellor are still being felt by the organisations that are having to pay the excessive price of the hospitals, schools, roads, and other projects that were funded in this way when he was Chancellor, because he, like Rachel Reeves, was desperate to keep the cost of these projects off the public balance sheet for absolutely no good reason at all and in a manner which fooled absolutely no one.
But she apparently is dedicated to doing the same thing, and that will be a similar disaster. I can guarantee it now.
There's another project that she's looking at, which also worries me. She wants to cut down the regulation that limits the growth of the City of London, she says.
She's telling the regulators to look at their rule books. She's instructing them to remove any rules which look unnecessary, and which might duplicate each other. She's removing the safety net. And the safety net is what protects you and me from the abuse that the City of London can perpetrate.
One of the things she's looking at is putting back a new scheme to compensate people who are subject to fraud when their bank accounts are raided. It's not the fault of the person who loses the money that that cash has been removed from their bank account. It's a weakness in the bank system that does that. And the new regulation was meant to compensate them for the fact that the banks had failed to protect them from fraud. But she wants it pushed back because this might make the City less attractive for investors.
Really? She would rather favour the bankers and inflate the city more than protect the consumer of banking services? This is the last thing that I expected from a Labour Chancellor. It's absurd. But again, it has all the echoes of Gordon Brown all over it. Why? Because Gordon Brown was noted for his light touch regulation of the City of London.
He thought there was no regulation that could not be looked at to make the City grow as the engine that drove the UK economy as far as he was concerned until, of course, 2008. And what happened then? There was a global financial crisis. It didn't only happen in London, of course. Let's not pretend it was a peculiar problem to the UK, because it wasn't. It started in the USA. But it was pretty grim in London because our light touch regulation meant that many of our banks were more exposed to risk than those in other countries, and therefore we paid a higher price.
That was Gordon Brown's fault. Let's not beat around the bush. Whilst the man had his strengths, and in some ways he did, he had some decided weaknesses, and this was one of them.
And it appears that from these two things, Rachel Reeves is determined to pick up the worst of Gordon Brown's ideas and use them to characterise the new Labour government in office. I have no idea why she's doing that. I am completely baffled by it. But it is an absolute fact that what she is putting forward - it's the very worst of Gordon Brown's plan under New Labour from 1997 to 2010.
If she wants to go the same way as them and then lead to many years of Tory rule because the opportunity to say that Labour broke Britain would be available again, she's going the right way about it.
This really worries me. She really has to change tack very soon. And she has to get some decent advice and some good ideas because right now she seems out of them and that's very worrying when she's only been in office for a little over a month.
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But what value exactly does The City ‘add’ compared with a housebuilding programme, investment in renewable energy, improvements in public transport etc etc
I suggest a few words my former Merchant Navy Colleague a Scottish Stoker who looked like Dave Lister and sounded like Rab C Nesbit might have put in front of ‘All’ none of which would get past a profanity filter.
I’ll bet your Rab C soundalike wasn’t wrong though.
Profanity has long been frowned upon, perhaps more so of late, but we’re going to need a lot more straight thinking and very straight talking to get us through the next few years.
We’ll be totally profanitied without it.
Spot on Richard.
Labour’s cowardice about rejecting any change for the better is beyond belief.
But as many commentators on your blog have noted, ” we were warned”.
At best the country can expect crumbs from Scammer & Co after all the writing was very much on the wall for those who bothered to think in any depth that this was going to be a Tory Two Party. Siesta time yet again for the British people!
You can tell from the comments on this Guardian article that disillusionment is setting in very quickly with Scammer & Co. Only the moderators are still trying to pretend this time is different!
https://www.theguardian.com/commentisfree/article/2024/aug/14/the-guardian-view-on-labours-economic-message-blaming-the-tory-legacy-isnt-enough#comments
Reeves is a private sector plant at the heart of government. Like too many in politics these days.
That’s about it. Is there anything else to say?
The recent changes to housing finance prove that Reeve-cividism back to Gordon Brown’s no so clever tactics is already on.
Councils can now spend 100% of their right to buy (RTB) receipts on schemes instead of 50%.
They can combine RTB receipts and s.106 contributions for infrastructure from private developers.
The cap for private sector acquisitions by Councils to use as affordable housing has been lifted.
So, the private sector can get all those receipts for their badly built houses and also use their paltry s.106 contributions to ‘contribute’ to social housing.
Just compare that to what Laboured has not done.
Laboured will not allow Councils to combine RTB receipts with government funded Social Housing Grant!! Which would help councils make their receipts go further.
A colleague at work is buying a house under a shared ownership scheme that has been part funded by Homes England and Legal & General has set up an ‘affordable housing arm’ to apply for social housing/affordable housing grant for shared ownership schemes which Shelter has criticised in the past as being an expensive way to get into home ownership.
New private estates now hand over estate management to management companies that will sweep your streets (maybe) for an annual charge on top of your poll tax.
Do you have to be cynical or a genius to see which way this is all going? Do I really need to spell it out?
And the people you vote for are helping this to happen.
Sick.
BBC Radio Scotland has decided to blame the SNP in Scotland for Rachel Reeves being a Tory Chancellor. An interviewer of a Scottish Government minister listed several hundred million pounds of poor one-off investment decisions by the Scottish Government over a number of years. I do not argue about the SNP mistakes. The SNP has served the island ferry services badly. The financial significance of the waste however is far less material. The Scottish Conservatives used the ferry blunders to try and cover the colossal financial blunders and irresponsibility of the Conservative Government by trying to rerun the ferry cost endlessly. It was species humbug. The Conservative were spendthrift with billions of waste, on a daily basis.
BBC Radio Scotland News is doing the same thing. The point of the BBC questioner was to make a financial point, but make the SNP look incompetent, by distorting the relative financial quantum. It is humbug, and financially illiterate. The total mistakes are of small overall budgetary significance over the undefined period the BBC covered deliberately in a rush of figures (on one-off, mostly capital investment), on a £60Bn annual budget of mostly recurring expenditure over the same number of years. It is literally a nonsensical comparison. The BoE (and Treasury) blew half the whole annual Scottish Government (£30Bn) in a single day, on the LDI crisis, to cover their regulatory failure. The problem the BBC do not want to discuss is that the Labour Government are a Tory Austerity Party flying a false flag, because the Union is governed by a Single Transferable Party.
The BBC is politically biased and spins Government propaganda. refuses to face the total incompetence and hypocrisy of British Government.
Thank you, John.
Yesterday, I noticed the BBC kept saying “Labour government”, not government, when reporting the cuts in winter fuel support. As usual, the BBC found a few people to say the government must live within its means and there are more deserving cases, all in the name of balance.
BBC claim to have balance and claim that they “verify” their reporting. But, I tend to open my eyes each mid-week morning to the joys off BBC R5L “Wake up to money”, which draws on “experts” on political economic issues that are generally comical if their contribution wasn’t none sense. Should try to sleep later.
I refuse to do that slot. It is too early
Scotland is over endowed with well educated citizens. A lot from the lower end of the earnings scale. Working class if you will. They work hard but are denied a fair deal in life.
It baffles me that so many educated AND streetwise individuals can be duped by rich neoliberals wearing nice suits and pontificating in posh accents.
Reading through the blog – it could almost have been a description of the sort of “thinking” (I use the word losely) wrt “the lettuce” aka Trussed. The same mad/utopian nonesense, the belief that “things will get better”. The woman, like “the lettuce” is wholly controlled by others (the city, & nutty Treasury economists living in la la land).
Which leaves the open question: who will “win” – Starmer decides that she is failing boots her out and gets someone more capable (suggestion: pick someboyd randomly off the street – they could make a better fist of it) – or will Starmer be pushed and replaced by.. ?? Early days, but others have noted that Starmer may only be an interim PM.
In fairness, it is playing out almost exactly as was predicted. Time to revisit the list?
Thank you, Mike.
“Yes, we can!”
Let’s start with the favourite, not just the Blairite favourite, Streeting, the Blairite back up Darren Jones, Starmer’s preferred candidate Reeves and outsider Ed Miliband, who I doubt has the appetite for another bout of character assassination and that’s just from the Blairites. Blair is likely to order that his gang coalesce around Streeting and avoid Reeves getting in by default.
Clive Lewis has been talked about as a soft left, but footage of him will soon be broadcast to ridicule him out of the contest.
Stephen Kinnock? Only in his family. Thank goodness.
Other than Miatta Fahnbulleh and Yuan Yang, both economists, no one in the 2024 intake that can be considered soft left. It’s probably too soon for them.
I would have loved Zarah Sultana and Faiza Shaheen, but it was not meant to be. They practice the wrong religion, too.
I don’t think the Blairites are unhappy with a change of leadership so soon. They are ready.
We’re doomed!
The new Labour glossary:
Devolution to the regions: continued control by central government.
Fiscal Rules: tie yourself in knots so that you can’t do anything,
Financial Prudence: continue the last Tory government’s austerity programme.
PFI/PPP: off balance sheet major projects, making huge sums for the City.
Improving the City’s attraction to the world: making huge sums for the City. Who cares about the inevitable crash.
Improving the NHS: open it up to private sector innovation, making huge sums for mainly US health companies.
Innovation in local government: making huge sums for the private sector.
You are correct Richard, we were all warned about what was to come. I know that quite a number of my friends and acquaintances voted Labour ‘to get the Tories out’. Sounds fine but I was hard pressed to see that changing one lot of conservatives for another was a good idea. It seems though that Labour is more ruthless and dangerous though! I found it odd that some commentators kept including Labour in the progressive camp!
Another thing that has cropped up at work recently is ‘overage’.
We see a lot of this in the private sector where someone who sells something can contractually benefit from it being sold on at a profit by the new owner. The seller gets a cut of future growth. Typical private sector ‘cleverness’ called ‘having your cake and eating it’.
Well, your government does this too in housing.
If we fund some of our housing with affordable housing grant OR it already has funding and an overage clause is in the contract, if a local Council sells the units for whatever reason in the future – because the units(s) is hard to let or to fund something else, your government will expect a cut of any profit. So much letting Councils run their own HRAs and be free to manage the money and the stock as they see fit.
Given the amount of financial retrenchment by central government, the niggardly grant levels etc., I find overage clauses from an organisation that owns the money supply and whom can never run out of money and is supposedly responsible for devolution and housing policy in the face of huge demand, offensive and totally inappropriate.
There is something severely going wrong with the Treasury.
My next issue is over the abuse of language.
Social Housing Grant is now known as Affordable Housing Grant. In one fell swoop, the Tories redefined the purpose of any central government grant support for housing and used this to come up with the Help to Buy scheme for the private sector.
Will Stymied’s Laboured Party scrap this heinous abuse of language and orientate back to ‘social housing’ and aim investment where it is needed? Or will just continue to give money to private developers and help the well off buy expensive homes?
The only kind of crossing the Thames should have is walking/cycling or public transport. But, this will inevitably be another road building scheme which will increase motor traffic and thus pollution and congestion. Great. We already have the Silvertown Tunnel being built and yet walking and cycling still has absolutely nothing East of Tower Bridge except two tunnels which are unfit for purpose and often require going down some steps because the lifts are broken.
Much to agree with
PSR,
Local councils when disposing property have to get best consideration, S123 of the Local Government Act 1972.
The government guidance notes for this section stress the importance of thinking about overage.
There are exemptions in the 1972 Act that permit local councils to sell for less than best consideration.
The overage requirement came in because, I think it was the NHS, sold off surplus land for peanuts. The buyers got planning permission for change of use to residential and banked fortunes.
Fair enough John, but its context isn’t it?
I am talking about the same rules applying to local authorities who work in the public interest who would need every penny to reinvest any profit back into new affordable homes or improvement programmes.
As well as claiming any overage, the same Government is also under-funding affordable housing is the first place!
Local Authorities HRAs do not have shareholders – any surplus is reinvested in the stock or the management thereof.
It make no sense to me.
Great news people! Rachel has found some money!
I’ve just received a letter from the DWP informing me that as I am approaching my 80th birthday I will be entitled to a higher amount of State Pension.
A whopping 25p per week! (I’ll have to remind my wife not to go mad and spend it all in one shop).
Alright so I’m being facetious, it’s either that or bang my head against a brick wall at the sheer silliness of it.
£13 a year
It cost more than to to tell you
Enjoy it
This beggars belief.
No view on the merits of the project but debt to build it will be more expensive than gilts; Investors will require dividends. How can this possibly make sense?
It does not, in any way
[…] a lot of my social media attention this year has been on YouTube (where the video on Rachel Reeves, published yesterday, got more than 25,000 views in its first twenty-four hours, which is more than the reads here in […]
Earlier in the week ‘Colonel Smithers’ (a commentor with so many insights into certain higher echelons of the state that a friend of mine fails to believe they are real) included in a comments a link to an article about the extent of Blair and Blairite influence/inclusion in Starmer’s Labour. It was written back in May, if I recall correctly, but I have to say I was surprised at the degree – even as a total cynic of modern day politics – by the extent of the capture.
But having read it I have to say I’m not at all surprised by what we see of Reeves copying Brown, Streeting copying the techno-utopianism of Blair for the NHS, and last evening on C4 News, Jacqui Smith being ‘entirely relaxed’ with letting a few universities go bust, if that’s what the HE ‘market’ dictates.
So let’s be absolutely frank shall we, and recognise that what we have with Starmer and Co is New Labour 2.0. Nothing more and nothing less.
It may be very much worse
Thank you, Ivan.
For some background. I have worked in / on regulatory and trade policy, in the UK and overseas, since July 2007 and represent my City employer at two UK trade bodies. In addition, I am a member of two professional bodies. I have also worked in front line banking. I often work with the leaders of firms, ministers and civil servants, consumer groups, charities, environmental groups etc. I rarely work with trade unions as, unfortunately, they are just not interested. I have also done some work for the Bank of England and was offered a job there in November 2021. These are where I obtain insights. I have to say that the public has no idea of the level of “state capture”, to borrow a phrase from South Africa.
A bit more about me: https://www.nakedcapitalism.com/2019/10/naked-capitalism-a-vintage-tipple-for-survival-in-the-neo-con-and-neo-liberal-world.html.
Thanks
Thanks Colonel. And as a long time student of government and politics and academic (now retired) in the subject, I had no doubt about your credentials. Similarly, I’ve no doubts about the extent and depth of the capture of the British state, but your experiences and insights are, nevertheless, still extremely valuable.
On Newsnight on Thursday evening (15 Aug 2024), economist Faiza Shaheen who was deselected by Labour noted the use of the erroneous “household budget meme”:
“The broader problem here with the economy and what Rachel Reeves is doing, is that they’re saying these things without fixing the foundations they’ve painted themselves into a corner by having these fiscal rules by playing into this narrative that is wrong about household budgets and the way the economy works.”
https://www.bbc.co.uk/iplayer/episode/m00220k8/newsnight-15082024
At 22:43
She was right