All pain, no gain: Labour's odd strategy

Mint

a day ago

All politics is about pain. Governing is a matter of deciding who is hit and how hard. Sometimes this can be a virtue. 'If it isn't hurting, it isn't working," was the mantra of John Major, a former Conservative prime minister, who embraced high interest rates and high unemployment in order to bring down inflation during the early 1990s. Ronald Reagan opted for a similar slogan when suffering the same ailment: 'No pain, no gain."
Today in Britain Labour has a different approach: all pain, no gain. Under Sir Keir Starmer, the party spends its political capital in places where it generates the lowest return. Whether it comes to winter fuel or welfare reforms or even dishing out cash to northern mayors, the government has an unnerving ability to endure the maximum amount of pain for the smallest possible gain.
Under this government, fiscally irrelevant savings provoke uproar. Scrapping the universal winter-fuel allowance to save an annual £1.1bn ($1.5bn, or 0.04% of gdp) was a totemic policy. It was deeply unpopular (pensioners liked receiving £300 for nothing) when announced by Rachel Reeves, the chancellor. What Labour would suffer in political pain was worth it for what it would gain: a reputation for pursuing sound policy, even if voters squealed. Now, the government has back-pedalled. All but the richest pensioners will receive the handout. A cost-saving measure will save practically no cost. Pain? Plenty. Gain? Almost none.
Labour has long stuck by the two-child benefit cap, citing its £3.5bn cost to remove. That left 540,000 or so children in poverty and made backbench MPs furious. Nearly a year on, Sir Keir is thinking of reversing course. What kind of Labour prime minister wants to oversee a rise in child poverty? Labour could be a party of fiscal prudence or one committed to lowering child poverty. Somehow, it has managed to come across as neither.
Even where Labour has stuck to its plans, it has done so in a way that maximises punishment and limits reward. In the spring Ms Reeves reduced disability benefits by £5bn. The cuts were deep enough to upset a base which sees any reduction in disability benefit as a sin. Yet they were nowhere near enough to placate bearish investors who see welfare spending going up for ever. (They are right: these benefits are forecast to rise by 0.2% of GDP by 2030, even with Labour's stricter criteria.) Labour has taken to threatening a chainsaw and then wielding a scalpel and wondering why everyone, across the spectrum, is annoyed.
The timing and size of the welfare cuts were not due to an ideological belief that fewer people should be on benefits. It was to ensure that Ms Reeves would not break her fiscal rules. A £5bn hole had appeared in the Treasury's spreadsheet and £5bn was found to fill it. Labour's fiscal rules are supposed to hurt. But they are meant to guarantee stable policymaking. Increasingly they guarantee the opposite. Fiscal policy becomes a recurring drama, whereby Treasury officials amend spending today to hit a forecast—and almost certainly wrong—number in four years' time.
Labour has to fiddle with its fiscal position so often because it will not think big on tax. By ruling out increases to the broadest taxes, such as income tax and vat, Ms Reeves has focused on steep rises to less lucrative ones. An inheritance tax on farms raises barely £2bn but guaranteed tractors turning up in Whitehall and blasting their horns outside Downing Street.
All pain, no gain is the guiding principle of even the party's more radical flank. Angela Rayner, supposedly the most left-wing member of the cabinet, came up with a plan to target the relatively rich, which helpfully ended up in the newspapers. Pensions could be raided and dividends taxed more heavily. It amounted to £4bn. For context, the British government hoovers up £1.3trn in tax revenues. Middle England would squeal, naturally, yet the public finances would hardly look healthier. Less soak the rich; more squirt them with a water pistol.
Where there is a case for collective sacrifice, such as when it comes to defence spending, the government refuses to make it. Instead it promises no pain, just gain. After the cold war, countries slashed defence spending, allowing them to splurge on welfare without having to raise taxes. It was called the peace dividend. Now the government faces the inverse: defence spending will have to rise from 2.3% of gdp to at least 3%. Rather than admit that this will be painful, Sir Keir insists it will be pleasant. It will be a 'defence dividend", says the prime minister, bringing jobs and investment. He promises it 'will be felt in the pockets of working people". Voters will indeed feel it in their pockets. But not in the way the prime minister thinks.
No pain, no gain? No! Pain. No gain
Back in July, when Labour should have enjoyed a post-electoral glow, Ms Reeves promised only pain. The chancellor made a show of pausing a slew of planned infrastructure projects when she arrived in office. 'If we cannot afford it, we cannot do it," was the chancellor's mantra. It turned what should have been a deluxe honeymoon into a wet weekend in Wales. Almost a year later, on June 4th, Ms Reeves gave these projects the green light once more. Almost a year has been wasted. For a government whose only hope of re-election relies on people feeling better off than they did five years ago, this is not time they could afford to lose.
Pain without a purpose is pointless. Policy without any pain is simply a lie. The restraint in day-to-day spending that Labour will unveil in its spending review on June 11th will not be popular. It never is. But it could be accepted as necessary. If this often rather vague government has a project, it is making Britain accept that it must consume less and invest more. That means there will be short-term pain, for long-term gain. There is a case that the government could make. It will hurt. But it might just work.
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