2 days ago
Reeves's choices will make Britain poorer
The French statesman Pierre Mendes-France once said that to govern is to choose, and it was a maxim repeated often by the Chancellor in her spending statement to the Commons today.
'I have made my choices. In place of chaos, I choose stability. In place of decline, I choose investment. In place of retreat, I choose national renewal. These are my choices. These are this Government's choices. These are the British people's choices.'
This might have sounded like a nice rhetorical flourish – an ironic echo of Mrs Thatcher quoting Francis of Assisi in 1979 – but what does it tell us about the Government's priorities?
It is to continue spending money we do not earn and do not have because Labour is unwilling to take the difficult decisions necessary to reform the areas that cost the most to sustain, namely welfare and the NHS.
The Treasury ostensibly spent months conducting what is called a zero-based spending review, testing budgets against whether they meet the Government's objectives and priorities. But who decides what they should be?
An increase in defence spending has been forced on Labour and will be paid for from raiding the overseas aid budget. In a rare moment of candour the Chancellor admitted the 2.6 per cent of GDP would include spending on intelligence, not just the military. But Nato has asked for core spending of 3.5 per cent plus an additional 1.5 per cent for associated budgets. Labour will be nowhere near the requirement. That is their choice.
Another priority is to allocate an extra £30 billion to 'our NHS' on top of the £22 billion already handed over when Labour took office last year. But where are the commensurate reforms that will ensure this is not wasted as so much money has been before? Wes Streeting has yet to unveil his masterplan for the NHS so we don't know; but history tells us to expect little in the way of change. Indeed, a renewed commitment to the nationalised ethos of the NHS, first set out in 1948, was cheered by MPs. That has ensured another decade of decline.
Surely, with debt so high, the whole point of examining eye-watering levels of government spending is to try to bring it down, not tinker at the edges of departmental budgets while the overall amount balloons. But that is what we are seeing. The only savings she announced involved the closure of some public buildings, cutting back office costs and other 'efficiencies'. How often have we heard this before?
Ms Reeves, who claims to have inherited a broken economy, has within the space of 12 months apparently so transformed its fortunes that she is able to splurge.
She still believes that growth will provide the revenues even though her policies are inimical to economic expansion. Figures this week show the number of people in jobs has slumped at the fastest rate since 2014 directly as a result of the Chancellor's increase in employer National Insurance which took effect in the spring. How has that helped boost the economy?
Ms Reeves made much of giving the go-ahead to extra investment in national infrastructure, such as roads, regional airports and local transport, which is undoubtedly needed, even though day to day spending will fall.
All her hopes for growth rest on kick-starting major projects, including a swathe of social housebuilding schemes underpinned by a £39 billion investment over 10 years and reforms to planning laws to limit the scope for objections. But the industry says a serious shortage of skilled workers makes such promises impossible to fulfil. Moreover, will 'affordable housing' be filled by illegal immigrants ejected from hotels?
The biggest issue is how to rein in spending on programmes that are spiralling out of control. Reforms of personal independence payments (PIPs) are in the pipeline but will they really go ahead? Labour Left-winger Richard Burgon said during Prime Minister's Questions that party backbenchers will not support the £5 billion cuts in a vote expected later this month. Scores of Labour MPs have signalled opposition and while Sir Keir Starmer stuck to his guns, this week's U-turn on the winter fuel allowance shows how he can buckle under pressure.
The biggest problem facing the country is unsustainable debt, now around 100 per cent of GDP and record levels of taxation. Just paying the interest costs more than the defence budget and yet borrowing continues to grow. Nothing the Chancellor announced will reduce debt and everyone knows that she will have to raise taxes in the autumn or risk a market backlash.
She keeps saying this is all being done to help 'working people' but they seem not to include the people who pay most tax, many of whom are already leaving the country. Net emigration among higher earners has reached its highest level since the financial crash.
Like Labour chancellors of yore, she is spending money she does not have and will need to take more from wealth creators to fund it. Another French statesman, Jean-Baptiste Colbert, once said: 'The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.' The Chancellor has made her choice – not to pluck the goose that lays the golden egg, but to kill it.
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