Rachel Reeves is the third Labour chancellor of the exchequer be an MP in my home city. In earlier times, Hugh Gaitskell and Denis Healey both sat for Leeds seats too, as Reeves does today. Their budgets, like hers this week, were delivered in challenging, though extremely different, economic times.
Both these Labour predecessors, however, would unhesitatingly have recognised Reeves’s 2024 budget as what it is. It is a budget in the identifiably social democratic Labour tradition to which Gaitskell and Healey also belonged. It is a tradition qualitatively different from that of even the most progressive Conservative chancellor.
Reeves this week delivered a budget centred on the funding of public services after years of austerity under George Osborne and years of extra borrowing under Osborne and his successors, not least during the pandemic under Rishi Sunak. It is a budget willing to raise taxes and to increase borrowing, rather than to promise national wealth through tax cuts. It is one that looks to the state to promote growth, extend investment and support living standards, rather than looking to it to move out of the way to achieve those ends.
Whether Reeves was correct to do any of these things or not is a matter for debate and for the proving ground of history. What cannot be disputed is that it is a radically different approach from what came before. As Paul Johnson of the Institute for Fiscal Studies put it on Thursday, the budget involved “big choices” and “a change of policy direction”.
So let us clear one potential distraction out of the way at the start of deciding where Reeves’s budget will leave the country and the Labour government. Those who claim there is no essential difference between Labour’s approach and that of the Conservatives are simply wrong. That’s not a matter of interpretation or opinion. It’s simply a fact.
Clearly, though, that is not the end of the matter. As ever, the practical questions are the ones that really matter. Will Reeves’s budget do what it claims and intends, either economically or politically? Will it help to grow the economy and support living standards better? And will it win the public’s backing as the electoral cycle unfolds? Here, the answers are much less clearcut.
The most striking thing about the budget’s economic projections is that they contain so little evidence of sustained growth. In opposition and during the election, Reeves consistently characterised the British economy as suffering from one thing above all: a growth crisis. If you believe her budget figures, though, there will still be a growth crisis in four years’ time. Growth will rise by a healthy 4.3% this year and then drop back to 1.3% as the 2028-29 general election nears. An anaemic outturn of that kind could spell economic and political failure, not success.
Perhaps the figures cannot be trusted, as Johnson seems to feel. “The same silly games playing as we got used to with the last lot,” he dubs it exasperatedly. Perhaps growth will come through other routes. Planning reform could unleash more housebuilding and infrastructure construction. Once the details are clearer, Reeves’s new industrial strategy may stimulate further growth in new industries and small and medium enterprises. The much-vaunted post-Brexit reset with the EU may help boost trade and competition. Perhaps. Or perhaps not.
A change of direction it undoubtedly is. But that is not the same as a safe arrival in a different place. A century after the ousting of the first Labour government in 1924, this is a theme that runs through the party’s history. It is a big theme with a big lesson. Those who wish to arrive in a radically changed and more social democratic Britain, as Reeves does and Labour does, must provide enough of the public with enough reasons to stay the course, especially when things get hard. Gaitskell and Healey would discover the perils of not doing that.
This is where Labour is also getting it wrong in 2024, both during and since the election. Before July, Reeves clearly knew that she would need to deliver a new settlement of the kind she did this week. Yet Labour was also fixated on not allowing the media to scare voters with the prospect of raised taxes. The result was a disjunctive message – we will bring big change for the country without big change for you. The election result was perhaps a vindication of that ambiguity. But it has left Labour with very shallow reserves of longer-term credibility.
Successful governments need to give themselves elbow room. They need to be able to make mistakes and not be derailed by them. They need to be able to get some things wrong while trying to go on getting the big things right. The ministerial freebies row is a classic example of how not to do this, a piece of avoidable foolishness that still threatens to define too much of the new government in the public mind.
There are no iron laws about how to do this well. Tony Blair overcame the Bernie Ecclestone donation scandal because he had amassed trust in his larger aims during the run-up to 1997. Boris Johnson was able to survive multiple challenges to his credibility because enough voters continued to believe he would solve the Brexit crisis. Keir Starmer needs similar stocks of public resilience to achieve his goals. At the moment, though, the stock level is too low.
Modern politicians like Starmer and Reeves operate in an unforgiving culture. The public is indifferent towards politics and sceptical about government. Much mainstream media treats political figures with undisguised contempt. Social media have empowered the mob. Relatively small failings can have relatively large consequences.
Even so, a government whose overarching message is in tune with the times and the public mood is not doomed to failure. On many issues – jobs, fairness, the NHS, schools – Labour has such messages. By themselves, though, the messages are not enough. Labour still needs to win itself the right to get things wrong without being pilloried for it.
Perhaps unsurprisingly, it was Franklin Roosevelt who provides the best guide here. In 1932, before he first won the presidency, Roosevelt said this: “The country needs and, unless I mistake its temper, the country demands bold persistent experimentation. It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something.”
In other words, give me the political space to make mistakes, because you can trust me to aim unerringly towards the right goals. Starmer and Reeves could have told that story from the start. They chose not to. The budget gives them time to do it right. But not unlimited time.