The prominent backbencher and former transport secretary Louise Haigh, who is a frontrunner to become the deputy leader of the Labour Party, has taken aim at Chancellor Rachel Reeves’ “excessive deference” for the Office for Budget Responsibility (OBR) and adhering to “arbitrary fiscal targets”.
Senior officials in the Labour Party are set to agree on a process for electing a new deputy leader after Angela Rayner resigned on Friday over an underpayment of stamp duty.
MPs on the left wing of the party are vying for support from at least 80 colleagues plus union activists in order to stem influence from Starmer.
Louise Haigh, who left the government last November after it emerged she had pled guilty to fraud over a missing work phone in 2014, is one contender reportedly being told to put herself forward for deputy leader.
Writing for the New Statesman ahead of the Trade Unions Congress, Haigh said Rachel Reeves “must first rewrite the rules” as she blamed the OBR and the Bank of England for “compounding” problems.
In a series of recommendations, she said Reeves should tax banks higher and “confront the economic straitjacket” by revising the OBR’s remit, which she claimed did not take the effects of child poverty and “progressive taxation” into account since it did not make long-term growth projections.
“Originally created to provide an independent check on economic forecasts and help policymaking, [the OBR] has morphed into a gatekeeper of orthodoxy,” Haigh said.
“Its models often underestimate the long-term returns of public investment and ignore the wider benefits of progressive taxation or public ownership.”
Haigh highlights Labour left’s grievances
In broadside remarks against the OBR, Haigh said Reeves should focus on changing rules to make the fiscal watchdog put together one fiscal report a year and publish “supplementary long-term assessments” for investors to see the “real savings from social investment”.
“With the average maturity of UK gilts at 14 years, markets already take a longer term view,” Haigh said.
“Governments should be able to do the same. Well-designed welfare reform would not only save money but command support across the parliamentary party, and with time ministers could have built a credible package.”
Haigh also took aim at the Bank of England’s quantitative tightening (QT) programme as she appeared to endorse an IPPR report calling for banks’ earnings to be taxed.
She said the Bank’s mass sale of gilts was leaving the Chancellor exposed to the independent central bank’s manoeuvres while commercial banks were making “hundreds of billions in deposits”.
“It is beyond comprehension that we have not already reformed our approach to the payment of interest on reserves held in the Bank of England reserves.”
“Other central banks, like the European Central Bank and Swiss National Bank, have introduced tiered interest payments on reserves, reducing this burden without compromising monetary policy.
“The idea that we must continue subsidising the banking sector at full interest while cutting investment or welfare spending is economically incoherent.
“Figures like Gordon Brown have suggested options like increasing the bank surcharge as a way of dealing with this rising problem.”