Sir Keir Starmer has taken on the hard-Left and seen off the Tory Right. But now the Prime Minister faces his biggest battle yet: a head-on collision with the undisputed heavyweight champions of British politics — the Institute for Fiscal Studies.
Today, his Chancellor, Rachel Reeves, was set to stand up at the despatch box with the aim of establishing a new rhetorical baseline for the next five years. One that frames the economic inheritance as even worse than expected, with dumpster fires raging everywhere from prisons to public sector pay, with the inescapable conclusion that — contrary to the campaign just fought — taxes must rise.
Hang on, wasn’t it just a few weeks ago when Reeves conceded that, unlike previous shadow chancellors, she could not plausibly enter the Treasury and announce that things are so much worse than initially thought? That thanks to the Office for Budget Responsibility, the books cannot be said to have been “opened”?
Indeed, you may recall that during the campaign, the IFS accused both Labour and the Conservatives of being complicit in a “conspiracy of silence” about how they would plug the fiscal black hole. And over the weekend, IFS director Paul Johnson told Times Radio that many of the problems “ought to have been obvious”. But politics is not a morality tale.
Excitable Labour ministers have delighted in declaring that these are the worst economic circumstances a new government has inherited since the Second World War. This is not strictly true, but then again, it was not accurate back in 2010 when George Osborne proclaimed that the previous Labour government caused the global financial crisis by spending too much money on public services.
To be clear, Labour is not making it all up. The fiscal inheritance is genuinely grim. There is a reason why Rishi Sunak called the election for July and not November, and it was not because he thought the public finances were set for a glorious rebound. Instead, his precious fiscal headroom was rapidly vanishing, with public sector pay recommendations and costs associated with the infected blood scandal coming down the tracks.
The truth lies somewhere in the middle. No doubt, there will be specific departments and policy areas where the last chancellor, Jeremy Hunt, managed to suppress bad news. But on the broad brush strokes, Labour knew exactly what it was inheriting. It simply chose, for short-term political benefit, not to focus on how it would raise money to fix it during the campaign.
Yet the party has one thing going for it: voters preternaturally expect Labour — even when controlled by its Right flank — to raise taxes. Moreover, polling by More in Common finds that more than two-fifths of voters are receptive to the idea that Labour would discover the public finances were worse than expected. Sometimes, cynicism is a boon to governments.
Still, the real challenge for Labour isn’t public acceptance of higher taxation. It is ensuring that the money is wisely spent to deliver noticeably improved public services. Come the spring or summer of 2029, if NHS waiting lists are dramatically reduced, houses are being built and criminals sent to prison, today’s speech will have been largely forgotten.
The trouble for the Tories wasn’t simply that the tax burden rose under their watch, but that at the same time, no one could secure a damn GP appointment. Get that right, and Starmer might even pummel the think tanks into submission.
