Spring is the season of growth. But not if you are Rachel Reeves, whose Spring Statement on Wednesday is to be a painful reckoning with the inevitable effects of her first Budget last October.
By adding around £40billion to the nation’s taxes, the overwhelming majority on employers, it has acted like the bitterest of frosts on the budding growth in the economy.
This from the woman who, in an interview just after she entered No 11, declared she would lead ‘the most pro-growth, pro-business Treasury the country has ever seen’.
Now, the Chancellor is attempting to justify cuts to public expenditure on the basis that ‘the world has changed’. This, presumably, refers to the consequences of the election of Donald Trump on November 5 last year.
Yet Reeves’s Budget statement occurred only days before that, when Trump was already the favourite to return to the White House. This was not some unforeseen cataclysm, like the global pandemic.
In the BBC documentary The Making Of A Chancellor, Keir Starmer’s former director of strategy Deborah Mattinson says of Reeves: ‘She’s someone who is able to look several moves ahead.’ That sounds good, but is not supported by recent history.
Indeed, the supposedly strategic Chancellor is actually something of a gambler. I wrote here a few weeks ago about the time I met her over a game of chess (her childhood passion) and discovered just how reckless her playing style was.
It was certainly a gamble, last November, to allow only £9.9billion leeway in her binding ‘fiscal rules’, the sort of ultra-tight margin for contingencies one would normally associate with an opportunist pre-election Budget.
I was not in the least bit put out when Reeves removed the portrait of my father from the Chancellor’s office in 11 Downing Street and replaced it with one of ‘Red Ellen’ Wilkinson, a founding member of the Communist Party of Great Britain, writes Dominic Lawson
As a result, with the latest forecasts of the Office for Budget Responsibility showing the cost of annual public borrowing running £20billion ahead of its estimates of only three months earlier – the effect of the self-inflicted collapse in economic growth – this Spring Statement has the feel of an emergency Budget.
So much for ‘Securonomics’ – the word which Reeves claims to have coined to describe what she would bring to the role of Chancellor.
In an interview last August, she told Prospect magazine: ‘The name came to me as a stroke of inspiration at a shadow Treasury away-day.’
She used this meaningless but impressive-sounding term most prominently in her Mais Lecture exactly a year ago.
This occasion – the City of London’s most important annual event for those in finance and banking – has over the years been used by various Chancellors (and some Shadow Chancellors) to set out the long-term basis of their strategy.
The most significant lecture given at one of these events – though I may be biased – was that given in 1984 by my father Nigel Lawson, as Chancellor.
But even one who was no great admirer of his, The Sunday Times economics commentator David Smith, observed last year: ‘Lawson’s Mais Lecture rightly buried the idea that you could control inflation with wage and price controls. He also completed the task of burying post-war Keynesian demand management.’
Yet in her Mais Lecture on March 19, 2024, Reeves – presumably to distance herself from the Thatcherite economic legacy that Tony Blair and Gordon Brown had accommodated rather than trashed – declared: ‘Today it is evident that Lawson was wrong not only in application but in theory.’
Nigel Lawson on Budget Day in 1984
It is true that my father made some mistakes as Chancellor (he had a section about those in his vast political memoir, The View From No 11). But his record, overall, is one which Reeves should wish to emulate, not denigrate.
As the economist Ryan Bourne wrote of his period of office, on my father’s death in April 2023: ‘The combination of strong growth and restrained public expenditure saw the state shrink from 42.8 per cent of GDP in 1983/1984 to
34.7 per cent in 1989/90. Tax cuts saw revenues relative to GDP fall too, from 39.5 to 34.7 per cent of GDP. When Lawson resigned, the country was running a balanced Budget.’
We won’t see that again in our lifetimes, if ever. To be fair to Reeves, her fiscal inheritance was a most difficult one.
But it was preconceived dishonesty to invent a bogus £20billion ‘black hole’ to justify her savage increase in employer national insurance – having explicitly ruled out the need for any tax rises (other than on non-doms and those paying for their children’s education) during the election campaign.
It is also the case that, in the 1980s, we had a much more favourable demographic situation. Now that the Baby Boomers are entering retirement, there is a pressure on the benefits system that Margaret Thatcher and my father did not have to deal with.
Nor was I in the least bit put out when Reeves removed the portrait of my father from the Chancellor’s office in 11 Downing Street and replaced it with one of ‘Red Ellen’ Wilkinson, a founding member of the Communist Party of Great Britain, who eventually became education secretary in Clement Attlee’s post-war Labour cabinet.
It is absolutely right for each Chancellor to be able to choose the portraits of his or her own political heroes looking over them as they work.
As I pointed out to Reeves’s predecessor Jeremy Hunt, when he asked me about this, my father would have been much happier not to have his image in the Chancellor’s study, gazing helplessly over her as she proceeded to bring in policies which, far from being ‘the most business-friendly ever’, are doing dreadful damage to the entrepreneurial spirit he had worked so hard to promote.
Reeves is very proud to be the first woman Chancellor – which is fair enough, even though we have had a number of female PMs.
And she had pledged to ensure that ‘all the art hanging in No 11 is either of female artists or female figures’. So my father was of the wrong sex as well of the wrong political tradition.
But it is a silly idea that only female Chancellors or politicians have the right instincts about what their fellow women require from those in high office.
One of my father’s many tax reforms was in his 1988 Budget, which introduced a new tax treatment of married women, giving them, as he explained at the time, the same rights to privacy and independence in such matters as everyone else.
Hitherto, in tax terms, wives had been effectively treated as their husband’s chattels.
What will Rachel Reeves have to her name, in terms of tax reforms, by the end of her Chancellorship? The forgotten Securonomics was not a thing at all, little more than a soundbite to mimic Bidenomics – which the election of Donald Trump in any case obliterated.
Then there was her claim that she would be ‘the first green chancellor’. Now, in a desperate attempt to restore growth to an economy which has been much harder hit by her tax rises than she had ever imagined, Reeves has replaced that with a sudden conversion to the idea of expanding both Heathrow and Gatwick airports.
Her opponents – on both sides of the House of Commons – should recognise that Rachel Reeves is a fighter, not a quitter. But I fear she will not grow in the job.
