Tuesday, 14 January 2025

Is Reeves doomed?

 

Starmer’s initial response yesterday to the question about whether Rachel Reeves will remain Chancellor for the whole term of his government was to say that she enjoyed his full confidence, a line which he repeated several times before, eventually, one of his spokespersons gave the requested confirmation. As promises go, it’s about as trustworthy as his manifesto for the last election, and the Chancellor could be forgiven for feeling a bit like a football manager who knows that the club’s owner only has to declare his complete confidence twice more before the inevitable sacking.

She may be able to defy the laws of political gravity for a while longer, but four years is a long time, and in any event defying the laws of basic arithmetic will inevitably prove to be beyond her capability. Her claim that she could repair and sustain public services, not increase taxes or borrowing, and at the same time reduce the government deficit (which is what her entirely arbitrary but ‘non-negotiable’ fiscal rules say must happen) always depended on the assumption that the UK economy would grow such that tax revenue increased without changing tax rates. And not just grow, but grow in a way which is unprecedented in recent history and for which there is no basis in policy to justify. Reality and wishful thinking aren’t the same thing, no matter how hard the spin doctors might try to convince us otherwise. Something will have to give, and the easiest thing to change, politically, is those fiscal rules. There’s nothing strange in that – they invariably change when the Chancellor changes; and even Starmer will eventually work out that that is the cost he will have to pay.

The question is about how much damage is done in the meantime, since it is becoming increasingly clear that her response will be to stick by the rules and cut spending instead. She will claim – indeed, the government is already claiming with its target of a 5% spending reduction – that this will be achieved by cutting out ‘waste’. But defining ‘waste’ isn’t as obvious as it sounds: for most politicians, ‘waste’ is any spending with which they disagree. Whether school breakfast clubs, keeping libraries and theatres open, or even implementing reduced speed limits are wasteful or not depends on your political perspective. About the only thing we can say with certainty is that an imposed budget cut – whether of 5% or any higher figure which Reeves will announce in the next month or two – is rarely effective at reducing what the average layman would call waste, and invariably ends up with cuts to services. Calling it ‘fiscal prudence’ rather than austerity is a bit like calling a hungry tiger a big cat. Big cat sounds more friendly, but it will still be happy to eat you.

3 comments:

Spirit of BME said...

Good post. I trust you are sitting down, but we are reading off the same page on this topic.
Rachel from Accounts (RfA) budget and fiscal rules was directionally a balanced budget and was not the cause of the bond markets throwing a tizzy. If you look at the spread (gap) between the New York and London Markets that spread has not changed and what RfA said about global pressures is right.
Confidence of delivery is what RfA will be sacked on , and not the budget itself. This lack of confidence comes from when Labour was in Opposition, they cast themselves as a party of protest and not a party of alternative government as that was much easier to do and they were very good at it .They supported anybody without thinking of the consequences ,and it played to their base, but it did not prepare them to think more effectively.
I read that nobody in cabinet has ever had a job in higher management and their political education was that of the Student Union and public sector employment experience. Plaid is a classic protest party, and I can only count on one hand the people I came across that had the skill and competence to take on the responsibility of delivering good outcomes if they sat in a ministerial chair. That is one in every decade of my membership, and yes, you are one of them, although I am sure I would often disagree with your decisions.
The skill required to be effective in higher management ,is the difference between driving your car to work and then getting into a commercial airliner and taking the controls. If you trade in the bond and oil markets, it is the difference between your car and a jet fighter flying at the speed of sound. Keir Rodney Stamer and his cabinet have none of these skills and my God it shows.

John Dixon said...

Your comments about me are very kind, although your remark about only "one in every decade" might be a little less kind about some of our former comrades, if I may call them that.

'Rachel from Accounts (RfA)': I like that, and may steal it. It expresses beautifully the idea that she's more of a book-keeper than a financial strategist.

I did wonder, by the way, whether you intended to make the comment on this post, or whether it should have gone on an earlier post (https://borthlas.blogspot.com/2025/01/what-is-crash-anyway.html)?

Spirit of BME said...

Regret I cannot claim -RfA ,I read it somewhere last week and can’t remember where. Senior moment, I fear.
It does sum up a lot about her and goes some way to ‘adjust’ her CV claims.