Rachel Reeves' big speech sets out political attack lines

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Good morning. Rachel Reeves delivered the Mais Lecture last night. She set out a series of policy plans about how a Labour government would secure higher growth and with it, greater prosperity (and bigger tax revenues to spend on the public services).

She also made a number of political arguments that we will hear a lot more of, from many more politicians, if Labour wins the next election. Some thoughts on those below.

Mais oui

The shadow chancellor made a number of striking political arguments (OK, the whole thing is a political argument, but there are three starkly political examples that I think are particularly worth thinking about). Her first is essentially, the smarter version of Labour’s usual lines about how the past 14 years have been wasted.

Since 2010, economic policymaking has been characterised by two major failings. First, austerity, then instability. Austerity: the decision, in the context of historically low interest rates and slack in the economy, to sharply tighten fiscal policy.

Not only did it do severe damage to our social fabric and to our public services, but at a time when government could borrow and invest more cheaply than at almost any previous point, the failure to do so was an act of historic negligence.

Not just wrong in the short-term, macroeconomic sense, but also a failure to grasp a unique opportunity to undertake much-needed investment in our productive capacity. Investment was suffocated. Our supply-side weaknesses — in terms of both human and physical capital — were exacerbated.

Reeves is saying the Conservatives have got three big things wrong: the role of the state in helping to drive growth, the austerity of the 2010 to 2017 period, and the failure to borrow more during the era of ultra-low interest rates. We are going to hear an awful lot of this if Labour wins the next election. The big political point Labour will want to land is that it inherited a big, awful hole, and that it needs two terms (aka “a decade of national renewal”, also mentioned in Reeves’s lecture).

It helps that the argument “UK governments don’t do enough capital spending” is essentially accepted by everybody. (The only exception to that was a period driven by John Major and Tony Blair’s passion for private finance initiatives, an approach that came with some downsides of its own.) That’s helpful, because it allows Reeves to get away with this:

The so-called ‘mini’ Budget — with its programme of unfunded tax cuts, amid a concerted attempt to undermine our independent economic institutions — dramatically changed the fiscal circumstances in which we must operate. In October 2021, the Bank of England base rate was 0.1 per cent. In little over two years, that has risen to 5.25 per cent. In October 2021, the OBR forecast that net debt interest would cost £29bn this year. They now expect that cost to be £82bn.

I mean, come on. Liz Truss’s “mini” Budget had many short-term consequences, but it is not why interest rates are now 5.25 per cent. But the big thing that Labour wants to do not just in this election but for as long as it can will be to link everything that ails the British economy to the Truss experiment. This has a number of advantages, not least the other things that you can more reasonably blame (Vladimir Putin, Covid-19, Brexit, austerity) are either outside the control of any British government or are things that British voters backed at one time or another.

Blaming the 81,326 Conservative party members who made Truss prime minister for the UK’s economic difficulties is a much more comfortable attack line for Labour than blaming, say, Brexit.

In the present day, Labour is aided in this endeavour by Rishi Sunak’s inability to articulate why he does anything. Because the prime minister is either unwilling or unable to set out why he opposed Truss and what she did wrong, it is a lot more straightforward for Labour to link Sunak with Truss. This will become even easier in the future because unless something big changes in the Tory party, the next Conservative leader will be more Trussite.

“The Conservatives did a big experiment and that’s why things are bad” is going to be a resonant political argument for some time I think, even though it doesn’t hold true now.

Now try this

My belated dash through Mick Herron’s Slough House novels has reached Bad Actors, the latest in the series. They are very good and incredibly moreish, but I am already feeling a little bit bereft at the thought of not having another one to pick up next. It’s also a particular delight because my bus to work takes me past the Barbican (if only Herron realised how beautiful it was).

Top stories today

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• Inflation drops to 3.4% | The UK’s inflation rate fell sharply in February, bolstering economists’ arguments for the Bank of England to start cutting interest rates this year, as it makes headway in bringing price growth under control.

• Scottish Muslims torn between Labour and SNP | The intensity of feeling on Gaza in Scotland could influence some marginal constituency contests, damaging Labour’s prospects and assisting the SNP in the general election this year.

• NAO reveals the cost of hotel alternatives for asylum seekers | The conversion of former UK military bases and a barge to accommodate asylum seekers has cost £46mn more than using hotels for the same purposes, according to parliament’s spending watchdog.

• Here’s hoping | Jeremy Hunt has hinted that the government may hold the next general election in October. Hunt also suggested there would be one final Budget or Autumn Statement before the election, saying: “I hope there is another fiscal event this parliament.”

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