Reeves says the UK public can trust Labour with its money, but her plan is just a reheated version of one we’ve already tried over and over again, writes Elliot Keck
Ah, change. It’s finally here. The adults back in the room and all that. Only if it is change, it’s more of the plus ca change variety. From cronyism, rows about donations and freebies, all the way to hostile briefings and a loss of grip over the communications grid, at the surface this government feels little different to the previous government.
Only the real, deeper problem, and the one that will more likely decide the future trajectory of this government, is that it’s not just at the surface that this government is serving up more of the same. The issues haven’t changed, unsurprisingly given the new government has been in charge for less than three months (yes, really). We have an unproductive and recalcitrant public sector, resistant to change while still demanding inflation-busting pay rises (and even then, rejecting them as the nurses did on Monday). A tax burden that continues to grow, with proposals for tax simplification and reform off the table. Growing public spending, yet no evidence that services are improving. Millions out of work, with no serious proposals to reform the welfare system. A focus on gimmicks, such as a football regulator and banning smoking in pub beer gardens, rather than the serious business of government.
Reeves and her team would reject all of this, of course. She continues to claim that she wants to be part of the most pro-growth, pro-business government in history. The heavily trailed tax rises are necessary to fix the public finances and restore stability. Public sector pay deals mean an end to the years of industrial action. In her speech to conference on Monday, the Chancellor, armed with a cheshire cat smile that was probably supposed to be disarming, insisted that Labour could be trusted with people’s money, and that she had launched a “war on Tory waste”.
All of this is, I’m afraid, window dressing. The UK’s economic outlook is bleak given the policy prescriptions offered. The UK looks set to be second in the world for millionaires leaving this year, in part driven undoubtedly by the imposition of VAT on private schools and potential reductions to pensions tax relief. Economic growth will be hammered by increases in capital gains tax, with a rush of transactions in the coming months being replaced by a collapse, as people choose to hold onto assets for longer, while investors keep their powder dry. There’s a reason why under HMRC’s own analysis an increase in capital gains tax is likely to actually reduce revenues. Planning reform might cushion these blows. But it will take a long time to start making an impact and the road is treacherous.
And no answer to what ultimately is the biggest problem the country faces: the public sector simply is not working. There is no better example of this than the Driver and Vehicle Standards Agency, the DVSA, which cannot even provide driving tests. Brits, if they can even book a test in the first place, currently face average waits of four months, rising to 23 weeks in London. This is the state playing on easy mode, yet it’s failing at every level.
The reason why is simple: productivity. When we talk of a productivity puzzle, or a productivity crisis, what we mean is a public sector productivity puzzle. In the private sector, productivity growth has been reasonably healthy, up by about 40 per cent in the last 25 years. In the public sector it has flatlined. That’s why the 23,060 civil servants added in 2023-24, the largest increase in a decade excluding the covid years, has made no difference. Or why the Darzi report could criticise NHS productivity despite record levels of funding being pumped into the NHS. Or why total managed expenditure is now almost £1.2 trillion, or over 46 per cent of GDP, yet Reeves is still insisting that real terms public spending will continue to rise.
There’s no doubt that Reeves was left with a difficult inheritance. The fact that the national debt has just hit 100 per cent of GDP is a case-in-point. But the high-tax, high-spend, reform-lite approach on offer is the same dish that has been endlessly reheated for us for years, just with a different, and already slightly wilted, garnish.
Elliot Keck is head of campaigns at the Taxpayers’ Alliance