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Rachel Reeves’ statement in the House of Commons yesterday was a profound, brutal display of political power, buttressed by the chancellor’s righteous delivery and the grim reality she shockingly unveiled.
The ferocious Reeves served as tour guide for a fiscal horror show, one that exceeded already dire expectations. She accused her predecessor, Jeremy Hunt — hunched meekly opposite — of hiding a “£22 billion funding gap” for the current financial year. Hunt’s dismissive head-shaking failed to conceal his aghast expression.
Reckoning with her “unforgivable inheritance”, Reeves castigated a Conservative “cover-up” that “put party ahead of country”. The Conservatives hadn’t simply trashed the public finances, the chancellor continued, but hid their alleged wrongdoing from MPs, civil servants and, crucially, the country. Weaving Rishi Sunak’s subterfuge into a broader tale of Tory mismanagement, Reeves argued that his party had in effect cooked the books at a time of burgeoning disillusion with the political system.
“After the chaos of ‘partygate’ when they knew trust in politics was at an all-time low, they gave false hope to Britain”, Reeves blasted in her statement’s most affecting passage. “When people were already being hurt by their cost of living crisis, they promised solutions that they knew could never be paid for.”
But this wasn’t merely an act or political performance. Reeves’ vitriol was tangible and genuine — and her fiscal fixes correspondingly severe.
Having revealed the government’s plan for an autumn budget on 30 October — trailed as involving “very tough decisions” on spending, welfare and tax — Reeves announced the restriction of the winter fuel payment, so that it is only offered to the poorest pensioners. That, the chancellor said, would save the country around £1.5 billion.
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Elsewhere, the Treasury plans to make further savings by asking departments to find 2 per cent efficiencies. Reeves also announced the cancelling of works to the A27 and A303, the Conservatives’ largely unimplemented “40 new hospitals” pledge and the Advanced British Standard — the new qualification that was meant to be Rishi Sunak’s legacy. “It turns out he didn’t put aside a single penny to pay for it”, Reeves scolded.
In total, the chancellor announced savings of £5.5 billion this year and more than £8 billion in the next.
Naturally, Reeves’ speech was peppered with arresting slogans, designed to stress her fiscal seriousness and delivered with escalating severity. “If we can’t afford it, we can’t do it”, she declared time and time again.
Reeves’ rhetoric was appropriately forceful therefore; but rather more significantly, her assessment also garnered the assent of the experts. Institute for Fiscal Studies chief Paul Johnson — who had rubbished Labour’s “It’s even worse than we thought” shtick as dishonest ahead of the statement — expressed particular shock at the government’s asylum bill. Johnson denounced the secret £6.4 billion overspend on asylum as “huge”, adding: “[It] does genuinely appear to have been unfunded”.
Johnson’s IFS colleague, economist Ben Zaranko, joined in: “The £9bn contingency ‘reserve’ has seemingly been spent several times over. It’s a mess”. Reeves had revealed that the government reserve — set aside for unforeseen spending — had been spent “more than three times over.”
But the clincher for Reeves came by way of a letter, penned by the head of the Office for Budget Responsibility Richard Hughes. Hughes, expressing shock at the £22 billion “black hole”, announced a formal review into the forecasts for Jeremy Hunt’s last spring budget.
“[The previous government’s plans] would constitute one of the largest year-ahead overspends against Departmental Expenditure Limits (DEL) forecasts outside of the pandemic years”, Hughes wrote. “The review will assess the adequacy of the information and assurances provided to the OBR by the Treasury regarding departmental spending.”
There is, of course, the Conservative counter-argument, prosecuted yesterday by ex-chancellor Jeremy Hunt. With his legacy and economic credibility on the line, Hunt dismissed Labour’s black hole claim as “spurious”. “She will fool absolutely no one with a shameless attempt for tax rises she didn’t have the courage to tell us about”, he added.
One crucial aspect of Hunt’s case charges that Reeves has thrown a set of expensive measures into her “black hole” to artificially balloon it — notably the government’s decision to accept the independent pay review bodies’ recommendations for public sector pay rises. Had Reeves not done so, it has been noted, the black hole would have been more like £11 billion.
As such, the Conservatives argue that the cuts Reeves announced yesterday reflect political choices. Labour, countering, insists that accepting the pay review board recommendations was a necessary part of its inheritance which it, unlike the party’s predecessor, will not shirk.
In any case, it speaks to the profound power Reeves displayed and exercised yesterday that Hunt’s lengthy counter-peroration failed to shape the narrative. The shadow chancellor’s attempt to convince the House, and ergo the country, that his party handed over a glowing inheritance that faces unnecessary ruin rang utterly hollow.
If she hasn’t already done so then, Reeves is in the process of winning the argument over the fiscal “black hole”. Victory here would have profound political ramifications.
First, Reeves is creating the political room to conduct further fiscal fixes in the coming months, no doubt at the autumn budget on 30 October — “difficult decisions” she wants the Conservatives to entirely own. As such, Labour’s condemnation of their opponent’s record is not only politically viable, but in many senses necessary in forging popular and parliamentary consent for the actions the government intends to take over the coming months and years.
But Reeves also cast her Conservative opponents, deprived of office mere weeks ago, as reckless cowboys who played political games with the nation’s financial stability — ideologues who plundered Treasury coffers in the short-term, while scheduling in austere restraint to effectively swindle their fiscal rules.
That was the central political meaning of Reeves’ statement: Labour is attempting to entrench popular memory of the last government as profligate, dishonest and incompetent. If the party can truly win this argument, it could comprehensively bury the Conservatives’ reputation for economic competence — already on life support after Liz Truss’ “mini-budget”.
After Reeves’ statement, simply, the Conservative Party’s path back to power looks steeper still.
Lunchtime briefing
Rachel Reeves accuses Hunt of ‘lying’ about the state of the public finances
Lunchtime soundbite
‘It was her ambition to be leader of the opposition all along — not mine’
— Deputy PM Angela Rayner and shadow housing secretary Kemi Badenoch clash in the House of Commons over the government’s house building plans. Rayner adds: “I think [Badenoch will] find herself comfortable for quite a long time on those benches.”
In her statement today, Rayner set out plans to boost housebuilding to meet Labour’s pledge of building 1.5 million new homes by the end of this parliament. Local housing targets will now become mandatory, the housing secretary confirmed, with the total number of new homes per year under housing targets to rise from 300,000 to over 370,000.
Now try this…
‘What the Labour Growth Group is really about’
The Spectator’s James Heale writes.
‘King Charles’ €500K lobster dinner blows hole in French presidency’s budget’
Via Politico.
‘Rachel Reeves pursues political prize over £22bn financial hole’
The Guardian’s Peter Walker and Pippa Crerar on Reeves’ commons address.
