After changing into Chancellor, Rachel Reeves changed a portrait of Nigel Lawson, the financial architect of Thatcherism, with certainly one of Ellen Wilkinson, Clement Attlee’s schooling minister. It was a sign that the Treasury was below new administration – “Pink Ellen”, as she was identified, was a founding member of the British Communist Get together.
Reeves shouldn’t be 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 method,” a Reeves aide informed me.
Confronted with a selection between counting on giant tax rises or spending cuts to fulfill her fiscal guidelines, the Chancellor has chosen the previous (albeit with a serving to hand from the PLP). It’s a choice that may 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 doable to stay with the manifesto commitments,” Reeves informed BBC Radio 5 Reside yesterday, making specific what was implicit in her speech final week. “However that may 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 clarification: Reeves could be in peril 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 crucial political sign that Reeves despatched yesterday was that she intends to abolish the two-child profit cap, launched virtually a decade in the past by George Osborne, reasonably than tapering it as initially anticipated. “I don’t suppose that it’s proper {that a} youngster is penalised as a result of they’re in an even bigger household, by means of no fault of their very own,” she mentioned.
As a coverage resolution it’s an unavoidable selection. Why? As a result of Labour has made it an specific goal to cut back youngster poverty and no different measure does extra to create it. Over 630,000 kids, the IFS estimates, will probably 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 conscious 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 suitable 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 adequate at in its first yr: preventing and profitable arguments.
This piece first appeared within the Morning Name e-newsletter; obtain it each morning by subscribing on Substack right here
[Further reading: Dick Cheney’s bastard]