What the heck is Rachel Reeves up to?

Welcome to my first Evening Blend. Unless there are earth-shattering events each Friday, my intention is to try to cut through the events of the week and say what really mattered over the past five days. This week, it was the Treasury’s relentless efforts to ‘roll the pitch’ for the Budget. But the frenetic pace of the briefings and leaks is such that you have to ask: what the blithering heck is Rachel Reeves up to?

The Chancellor gave a speech on Monday in which she explained that the parlous state she finds herself in was the fault of the Tories, Brexit, the pandemic, foreign wars and the like. She knows what the Office for Budget Responsibility (OBR) will announce on Budget day, still 19 days away let us not forget, about how productivity declined in Britain over the past ten years, and is seizing on what she can to deflect the blame for sluggish growth on to external factors.

Then the Times revealed that Reeves has officially warned the OBR that she plans to raise income tax, breaking Labour’s manifesto promise not to, and plans to sell this as the fairest way to raise the money she needs. Alongside this, there may be a 2p cut in national insurance, to insulate the less well-off from the income tax rise – a clever-clever solution which emanates from the Resolution Foundation, which used to be run by Treasury minister Torsten Henricson-Bell. Fancy that.

My experience of writing about politics for 24 years is that most voters are colossally more ignorant about the specific policies and personalities we all obsess over in Westminster than is widely understood. I even had my hair cut recently by someone pretty sound who had never heard of Michael Gove! However, voters also have a deeply ingrained, feral sense about the general direction of travel and can suss out a con job or a dud politician at 100 paces. The same barber was fully cognizant that the government is making a botch job of governing. You don’t need to be the Witchsmeller Pursuivant to catch the whiff of incoherence emanating from No. 11 and the Treasury.

Think about what Reeves is trying to sell the public. First, ‘It’s not my fault, guv, it was the other lot, even though we’ve been in power for 17 months’. So, the Tories and Brexit made her break her pledge not to raise income tax in Labour’s manifesto, even though she didn’t do so straight after the election. The Tories left a £22 billion black hole, but mysteriously there is still a black hole in the public finances of £20 billion to £30 billion. Second, ‘Now I must break my sacred pledge because it’s the fairest way and that’s good for you, Mr Voter’.

But things are even more tortured than that. The most insightful WhatsApp I received this week was from a senior Labour figure who attempted to sum up the Socratic dialogue the Chancellor is attempting with the public:

‘What is the problem?’
‘Brexit.’
‘So, you’ll rejoin?’
‘No.’
‘What else is the problem?’
‘Productivity.’
‘What are you going to do about that?’
‘Tax people more.’
‘Anything else that’s the problem?’
‘Austerity.’
‘So, lots of new spending then?’
‘Absolutely not.’
‘What about welfare?’
‘It’s a big problem.’
‘So, you’ll cut it right?’
‘No.

Breaking manifesto pledges is a big deal. Dominic Cummings thinks Boris Johnson putting up national insurance was the final nail in his coffin. ‘No new taxes’ (a version of which was echoed by Reeves when she raised them by £40 billion last year) killed George Bush Sr.

Given the need to keep the markets from meltdown, I’m all in favour, for responsible economic reasons, when chancellors try to avoid too many shocks in Budgets – the rabbits should always be the good news. But if, as reported, Reeves wants to raise income tax by 2p (the first chancellor to do so since Denis Healey) she is going to need a better and more coherent political argument if she is going to get away with it.