Just how much longer will the government be able to sustain its assertion that the Conservatives left behind a £22 billion hole in the public finances? Confirmation that ministers are continuing to blame their predecessors for out-of-control public finances – and for expected tax rises in October’s budget – was provided this morning by Chief Secretary to the Treasury Darren Jones, who reacted to July’s grim borrowing figures by stating:
‘Today’s figures are yet more proof of the dire inheritance left to us by the previous government. A £22 billion black hole in the public finances this year, a decade of economic stagnation, and public debt at its highest level since the 1960s, with taxpayers’ money being wasted on debt interest payments rather than on our public services.’
Much of this is fair comment. The government has indeed inherited dire public finances. The reason that borrowing in July came to £3.1 billion – £1.8 billion higher than in July 2023 – was not because of a lack of tax revenues, which increased by £1.1 billion, but because of a jump in public spending. An extra £2.7 billion was spent on benefits compared with a year earlier, along with an extra £1.3 billion in departmental spending.
Keir Starmer and Rachel Reeves have already compromised their claim to be sound custodians of the public finances
It would almost certainly be futile for the Conservatives to protest that a large slice of the UK’s debt interest comes from debt which they themselves inherited from Gordon Brown’s government. Or for them to argue that another large slice of that debt is thanks to emergency Covid measures – the furlough scheme, test and trace etc. – which Labour supported. History suggests that it takes a party a long time to shake off a reputation for losing control of the public finances, and that excuses do not wash. In 2015 the Conservatives won an election still blaming Gordon Brown for the deficit he left behind. An internal Labour party report into that election, led by Jon Cruddas, concluded that the Conservatives were winning on the argument that they were better to be trusted with the public finances – in spite of the fact that they were still running a deficit after five years in government. Ed Miliband’s Labour party had made life more difficult for itself by focusing on ‘Tory austerity’ – reminding voters of how Brown had run up a deficit of nearly £160 billion. Brown never succeeded in blaming the ‘global financial crisis’ for the debts he left behind, in spite of shadow ministers parroting that line at every opportunity.
Yet if Starmer’s Labour similarly wants to carry on blaming the Conservatives for poor public finances it is going to be severely hampered. Unlike David Cameron and George Osborne, who came to office in 2010 promising spending cuts, Keir Starmer and Rachel Reeves have already compromised their claim to be sound custodians of the public finances by awarding above-inflation pay rises to teachers, junior doctors and train drivers. The train drivers’ award, in particular, is in danger of drowning out any claim to fiscal responsibility. The spending cuts Reeves has announced so far are modest compared with the long-term costs of increasing public sector pay – especially because they have been awarded without reform to pensions or working practices.
Cameron and Osborne never met their promise to balance the public books within five years of taking office. If Rachel Reeves fails to achieve her own more modest target of reducing debt as a share of GDP by the end of this parliament, opposition parties may well succeed in blaming this on Labour’s loose control of public sector pay. Few people want to hear from the Conservatives at the moment, but in time they will have an opportunity to establish a strong narrative along these lines.
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