Starmer and Reeves have a majority but not a mandate and are too weak to deliver anything. Only a new leader can give the markets and the OBR confidence that they have an actual plan, says Helen Thomas
As Budget preparation ploughs into the final furlong, the next field is already lining up on the race card. The runners and riders are gathering their supporters, stiffening their sinews and making their way into the starting stalls. Any misstep in the Budget, or indeed any other policy, and the starting gun will be fired on the Labour leadership championship chase. This raises the risk that whatever Rachel Reeves announces next week will not be enacted in full. Derby Day has only just begun.
There is precedent for reversals on Budget measures. Public opinion caused a climbdown by George Osborne in the infamous “omnishambles” Budget of 2012, after a tweak to VAT intended to apply to rotisserie supermarket chickens became branded the “pasty tax”. Kenneth Clarke announced in the 1994 Budget that the full rate of VAT should be extended to domestic fuel but when the vote came to implement the measure, the government was defeated 319-311 after seven of its own MPs rebelled.
The difference this time should be that the government has a large majority. Back in 1994 the Conservatives had lost theirs while Osborne was part of a coalition government. But the problem that has dogged this Labour government from the very beginning is that it did not get a mandate for the actions it has taken. When it comes to raising taxes, it actually got the opposite mandate – that it would not touch the big three taxes, even though Rachel Reeves’ first budget increased what she herself described as a “tax on jobs”, with the rise in employer national insurance. And its own MPs certainly didn’t consider that they had waited 14 years to take benefits away from disabled people and pensioners.
So now the government is headed into a budget “smorgasbord” of tax rises which not only harm a wide variety of different interest groups but also rest on untested assumptions for how much money they will actually raise. Far from the political dream of pleasing most of the people most of the time, this budget will please nobody, ever. We have yet to test the floor of support for the Labour Party in the polls, suggesting that even the country didn’t award them the majority for most of the measures they have gone on to enact.
Fresh leadership
A majority without a mandate can really only be resolved by an election. That moment will come, but to stem the bleeding in the meantime, the Labour Party can at least choose a fresh leader with a fresh policy platform. It may still not be what its 2024 voters want but it will be closer to what some of its voters want. Far from thrashing around at each fiscal event to ensure the numbers add up, the OBR and financial markets will have been given a clearer direction of what the new leadership intends to deliver.
The new leadership will also have a better internal mandate from which to utilise the majority. Whether it comes as a coronation, chosen by a clear consensus majority of its own MPs, or from a full-on challenge, elected by a majority of party members, the new PM can at least credibly claim a mandate for a plan.
The new leader can instil some party discipline, shore up the party’s position in the polls and award patronage to restive backbenchers. Starmer and Reeves are too weakened to deliver anything
The path will be rocky as it will expose internal splits within the Labour Party. But to the victor, the spoils – and for a period there will be a relative settlement of the agenda. The new leader can instil some party discipline, shore up the party’s position in the polls and award patronage to restive backbenchers. Starmer and Reeves are too weakened to deliver anything.
MPs know it. Some MPs have already gone on the record to oppose Home Secretary Shabana Mahmoud’s tighter immigration plans. Other MPs have said that such plans are just an “opening offer… I’m sure that they will want to try and hear concerns because we know what happens when they don’t”. This harks back to the last minute gutting of welfare reforms in the summer, when the government belatedly realised that opposition to the changes was so broad that they would be unable to get them through parliament. Reeves’ tears were an understandable response after her own MPs singlehandedly prevented her from meeting her fiscal rules. The OBR had only judged she met them “post-measures”, anticipating that a government with a large majority would easily be able to get those measures through. And yet they could not.
So as the OBR puts the finishing touches to its final Budget “post-measures” forecast which is due to be handed over to the Treasury on Friday, the final fences are yet to be jumped. Reeves can stand up and make a Budget statement but her party can force a refusal. They will do so if it catapults the eventual winner into pole position as prime ministerial hopefuls jockey for position. The race has only just begun.
Helen Thomas is CEO and founder of Blonde Money