As winter approaches, and fuel prices go up, Keir Starmer’s honeymoon period is well and truly over. The Labour government is clearly getting a little nervous about Chancellor Rachel Reeves’s decision to scrap the £300 given to millions of pensioners to help keep warm over the winter. It is now claiming that it had no choice but to save some money somewhere. ‘If we hadn’t taken some of these tough decisions we could have seen a run on the pound, interest rates going up and crashing the economy,’ argued Commons Leader Lucy Powell over the weekend. ‘It’s something we were left with no alternative but to do.’
‘If we hadn’t taken some of these tough decisions we could have seen a run on the pound,’ Powell said
Seriously? Is Powell really suggesting that the Bank of England might have been forced to step in with emergency support? Would runways have been cleared at Heathrow to allow the plane carrying officials from the IMF to land as quickly as possible? The claim that Labour had little choice to scrap winter fuel payments for pensioners not receiving pension credit is complete nonsense. And its scaremongering about what might have unfolded had it not taken the decision is dangerous.
If a run on the pound, such as the one witnessed during the short premiership of Liz Truss, was imminent, there was not much sign of it on the markets. In fact, the pound strengthened during the final week of the election campaign, as a Labour victory looked inevitable, hitting $1.28 on the day of the vote. And it has carried on rising modestly since then, hitting $1.31. This suggests an imminent collapse isn’t likely, or indeed that there is any kind of selling pressure at all. Even if there were, it seems hard to believe that the relatively modest sums saved from axing the fuel allowance would have been enough to stop the rout.
So, whatever Powell says, in reality it is ridiculous to blame the markets for the decision, or accuse pensioners of threatening economic stability. The Chancellor made a political decision to scrap the allowance handed out to pensioners regardless of whether they needed the money or not; the money will probably go instead on higher wages for the public sector. There is a perfectly respectable case to be made for that choice, but you might as well make it clearly. By making claims that are clearly untrue, the Starmer government is playing a troubling game. It is dramatically over-hyping the need for austerity, reducing its room to invest in infrastructure and other services that might actually help the economy. Even worse, if you keep on raising the spectre of a run on the pound then who knows: you might just end up with one.
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