Rachel Reeves won't thank Gordon Brown for his tax advice

Independent

3 days ago

When he appeared on the BBC this morning, former prime minister Gordon Brown said he was 'not here to second-guess Rachel Reeves's economic policy', adding: 'I don't want to be a back-seat driver.'
If the chancellor was listening, I suspect her response would have been hollow laughter. For someone who didn't want to be a backseat driver, he was giving some pretty detailed directions to a different destination.
Brown protested that he was trying to help by 'proposing measures that are within the manifesto and that don't break the fiscal rules', but it was the kind of help offered by a self-righteous relative who gets in the way and breaks things.
He advocated raising the tax on online gambling by £3bn a year, which could be a useful contribution to the £30bn-to-£50bn gap that has opened up between annual revenue and spending by the end of this parliament.
Except that he was suggesting spending the money on something else – paying benefits to families with three or more children. So his plan would do nothing to help solve the immediate problem in the forthcoming Budget, while highlighting another unmet need, and implying that Reeves is responsible for perpetuating 'a national scandal and a stain on our country's soul'.
Of course, he blamed the Conservatives – 'these are austerity's children, the victims of 14 years of Tory rule' – but the sting is in the implied rebuke to a Labour government that fails to do anything about it.
In this, he is aligning himself with the so-called soft left in the Parliamentary Labour Party – those MPs who blocked the attempt to restrain the growth in the disability benefits bill at a cost to the Exchequer of £5bn a year. Those MPs also want to lift the two-child limit on benefits. For many of them, their rebellion was driven by something fundamental: they want their government to do 'Labour' things, namely spending more on reducing poverty for children, the disabled and the elderly.
Brown's intervention, in effect, tells them that they are right – and implies that the moral case for higher spending outweighs the need for fiscal responsibility.
It is worse than that, because he pretended to be fiscally responsible, by saying how the extra spending that he wants could be paid for – but when he was asked how Reeves should fill the gap that she has to fill before she can even start to think about additional spending, he said it is 'not wise to give a running commentary'.
And it is worse still, because in his interview on BBC Radio 4's Today programme, Brown suggested that an accounting trick on defence spending would 'create the kind of headroom Rachel Reeves needs'. He proposed issuing bonds for defence spending of one per cent of GDP, and said it 'should be regarded as something extraordinary and exceptional outside the fiscal rules'.
Can you imagine what he would have said about such an idea when he was chancellor? You do not have to imagine it: when Ken Livingstone, the mayor of London, proposed a bond issue to finance the modernisation of the Underground in 1999, Brown dismissed it, saying: 'People would be worse off, the investment would not take place, and the Underground would be less safe as a result of that.'
Defence bonds would be trying to do the same thing, to take extra borrowing 'off the books' and fool the markets into thinking it doesn't count.
If Brown wanted to be helpful, he could prepare the ground for the inevitable tax rises in the Budget. He could explain to Labour MPs that Reeves has to start by filling the gap that already exists before she can consider any additional spending, however morally desirable.
He could help by explaining that Reeves's new 'black hole' is still a legacy of the fiscal irresponsibility of the Tory years, and still part of the long hangover from the coronavirus lockdowns. She hoped that she wouldn't have to come back for more taxes, but there was always a chance that she would, and that her inheritance would turn out to be more toxic than expected.
He could make the case for a big, bold measure to rebalance the public finances fairly, in addition to a number of small tax rises such as on gambling. He could argue – as The Independent has done – for a rise in income tax, and say that Labour's manifesto promises have been overtaken by 'extraordinary and exceptional' circumstances.
I don't know if Reeves would have been grateful for that either, but at least it would have made the point to Labour MPs that, admirable though their compassion might be, it has to be paid for. There are no short cuts.