After changing into Chancellor, Rachel Reeves changed a portrait of Nigel Lawson, the financial architect of Thatcherism, with one in all Ellen Wilkinson, Clement Attlee’s training minister. It was a sign that the Treasury was underneath new administration – “Purple Ellen”, as she was identified, was a founding member of the British Communist Social gathering.
Reeves isn’t now, nor has she ever been, a communist (the Chancellor likes to explain herself as a social democrat). However she is transferring coverage in a extra leftwards course. “We’re a Labour authorities of the left, we’ve had 14 years of making an attempt the right-wing strategy,” a Reeves aide advised me.
Confronted with a selection between counting on massive tax rises or spending cuts to satisfy her fiscal guidelines, the Chancellor has chosen the previous (albeit with a serving to hand from the PLP). It’s a choice that can transfer UK tax ranges, already heading for a postwar excessive of 37.7 per cent of GDP, even nearer in direction of the European social-democratic norm.
“It will in fact be attainable to stay with the manifesto commitments,” Reeves advised BBC Radio 5 Dwell yesterday, making express what was implicit in her speech final week. “However that will require issues like deep cuts in capital spending.”
That line was denounced by free-market economist Julian Jessop as “gaslighting” on the grounds {that a} completely different rule applies to infrastructure funding. But there’s an alternate rationalization: Reeves could be at risk of overshooting that too. In contrast to so a lot of her predecessors, although, the Chancellor has chosen to not take an axe to capital spending on the first alternative. Doing in any other case, she fears, would solely deepen the UK’s productiveness disaster.
However an important political sign that Reeves despatched yesterday was that she intends to abolish the two-child profit cap, launched nearly a decade in the past by George Osborne, relatively than tapering it as initially anticipated. “I don’t assume that it’s proper {that a} youngster is penalised as a result of they’re in an even bigger household, by way of no fault of their very own,” she stated.
As a coverage choice it’s an unavoidable selection. Why? As a result of Labour has made it an express purpose to cut back youngster poverty and no different measure does extra to create it. Over 630,000 youngsters, the IFS estimates, can be lifted out of absolute poverty by the cap’s abolition. That’s why Bridget Phillipson, Lucy Powell and Gordon Brown (revisit his NS guest-edit right here) have all demanded motion, and why Keir Starmer, as Andrew first reported, has privately described it as his private precedence.
However the politics stay much more fraught than the coverage. No 10 has lengthy been aware that the two-child cap is very standard with the general public, round 60 per cent of whom favour it, together with Labour voters.
Count on Starmer and Reeves to now be assailed by the fitting for permitting “limitless advantages” for “workshy” households (Nigel Farage’s Reform would abolish the cap however just for working {couples}). Confronting this cost would require Labour to do one thing the federal government wasn’t ok at in its first yr: combating and profitable arguments.
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[Further reading: Dick Cheney’s bastard]