Rachel Reeves’s good intentions mean nothing against rising inflation, meagre growth and falling employment, writes shadow secretary of state for work and pensions Helen Whately
One thing that I don’t think can be doubted about Rachel Reeves is her intentions. Like any Chancellor, of course she wants to achieve growth, prosperity and higher living standards. Of course she wants investment to increase, government debt to fall and unemployment to decline.
The problem isn’t her intentions. It’s that every single action she has taken has undermined them.
Labour progress report: Inflation up, growth down
Let’s start with inflation. Her stated aim is to hold it at the two per cent target she inherited from the last government. Instead, she has pumped £70bn a year extra into public spending – including huge public sector pay rises – and inflation has risen nearly a per cent since Labour have been in office.
This has caused interest rates to stay higher for longer. That’s not just a problem for businesses and households. As we found out last week, higher government borrowing costs have contributed to wiping out her entire fiscal headroom and left a £14bn hole in her figures.
Then you look at economic growth, which she has described as “the number one mission of this government”. Even in that statement there is a fundamental misunderstanding. Because it is not government that creates growth, it’s businesses.
Instead of supporting them, she has slapped huge taxes on them. Billions in National Insurance rises, huge hikes in Business Rates. Taxes that prevent businesses from actually investing in things that create growth.
At the same time, she spent her first six months in office talking down the UK economy for political gain. We have gone from the green shoots of recovery to the lowest level of business confidence on record outside of the pandemic, all since Labour have been in office.
Reeves refuses to admit she has got it wrong
The result of this were depressingly predictable. And yet, it genuinely seemed to take them by surprise when last week the OBR slashed this year’s growth forecasts in half.
She says she wants to get people off welfare and into work. But a combination of the National Insurance rises and Employments Rights Bill will mean there will be fewer jobs available, and businesses less willing to take a chance on people. According to the OBR, 160,000 fewer people are now expected to be in work this year.
On and on it goes. She says she wants to get more young people into employment and training. But she has made it £4,000 a year more expensive to hire an 18-year-old from April, and halved the number of apprenticeships available. There are now 100,000 more young people out of work, education and training since Labour took office.
Last week we saw in black and white every key economic indicator going in the wrong direction. It was as clear a rejection of Labour’s economic strategy as you are likely to see.
But instead of admitting that they have got it wrong, still they press on. The Jobs Tax kicks in this week. Instead of welfare reforms they have announced rushed cuts. The £5bn cost of Employment Rights Bill hasn’t even been factored in by the OBR yet.
Labour talk again and again about protecting ‘working people’. But nobody benefits if in five years the country’s economy is on its knees. Not everyone can work in the civil service and people need jobs to do at businesses that succeed.
It’s time to turn back. Good intentions are not enough, and the country simply cannot afford for this government to keep making the wrong calls.
Helen Whately is the shadow secretary of state for work and pensions of the United Kingdom