Good morning. Is Labour’s plan to borrow £28bn a year for the green transition dead or alive? The party’s all-too-public debate over the pledge reflects two competing concerns. The first is the Labour party’s anxiety about going into the election with anything that sounds like “uncontrolled” spending or that the Tories can weaponise to attack Labour over tax rises. The second is that retreating from the number might make the party look ridiculous, and deepen the perception that you can’t really tell what Keir Starmer is for.
It’s the biggest and most visible sign of strain in the Labour leadership’s strategy, but it’s just one part of their bigger difficulty: reconciling their desire to avoid a 1992-style attack over tax and spend with avoiding hemming themselves in office.
Almost everything that Rachel Reeves says is about her desire to avoid anything that might make Labour look like a party of higher taxes and higher borrowing. And almost everything Jeremy Hunt says is about trying to make sure she fails. Reeves said corporation tax would remain at or below its current rate of 25 per cent under a Labour government, while reiterating that the tax break known as “full expensing” would also remain in place. Here’s our story.
Hunt has played down the extent to which he will cut taxes in his spring budget — our story on that is here. There are all sorts of low political reasons for this. The more he and the Treasury sound as if they have no wriggle room for tax cuts, the bigger splash he will hope they have. That said, this isn’t without risk: in Hunt’s last fiscal event, he used most of his additional room for manoeuvre for sensible, pro-growth measures, such as spending more on quantum research and making full expensing permanent.
I think his cuts to National Insurance were daft and politically counter-productive for reasons that I’m not going to bore you all by repeating on a Friday. The framing of his last Autumn Statement meant that this was defined by an electoral offer that has thus far failed to have any measurable impact on the Conservative party’s standing, rather than a pretty hefty set of serious measures.
In practice, I think the most important thing about Hunt’s NICs reduction in his last fiscal event, and the heavily-trailed cuts to income tax that are still widely expected at Westminster, are the constraints they place upon Reeves after the next election and how she will get out of them. (We already know how the Conservatives will get out of them if they pull off an unlikely win, because we saw how this played out when Rishi Sunak was chancellor: he created a new form of tax that was essentially I Can’t Believe It’s Not National Insurance and hiked that instead.)
So here are the striking parts of Reeves’ statement: the first is that she distanced herself from calls from the right of the Conservative party to cut the rate of corporation tax further:
“We believe that 25 per cent rate strikes the correct balance between the needs of our public finances and the demands of a competitive global economy.”
While reserving the right to trim corporation tax in the future if she so chooses as chancellor:
“We will cap the headline rate of corporation tax at its current rate of 25 per cent for the next parliament. And should our competitiveness come under threat, if necessary we will act.”
A lot of this is just finding clever ways to get headlines that essentially read “I don’t hate business and I’m just a sensible moderate, says Rachel Reeves”. The political and policy choices over corporation tax are the easiest bit for the shadow chancellor to navigate because there are very good reasons to keep corporation tax where it is.
But when it comes to difficult conversations about the £28bn pledge and taxes more broadly, Labour’s task is much harder.
Conservatives and some in Labour expect that the Labour leadership will use Hunt’s tax cuts and fiscal forecasts in the spring Budget to completely abandon the commitment of spending £28bn, blaming Tory mismanagement of the economy as they do so. But others in Labour note that time and again, the leadership has marched up to the precipice of ditching the pledge only for Keir Starmer to then rein it back in again. (One recent example of that was his description of the pledge as “a confident ambition”. He then said he was keen to take the fight to the Conservatives over his green plans.)
The big thing that connects Labour’s position over tax and its ongoing uncertainty over the £28bn-a-year promise is that its desire to show that its spending plans are fiscally responsible, fully funded, credible and wouldn’t involve further tax rises can’t be reconciled with each other. Just as with Hunt’s own spending plans, something will have to give.
One of the reasons why the party’s position over the £28bn green capital spending plan is still confused and murky is that Keir Starmer himself has yet to make a decision on which way to go. Labour’s difficulties over green spending reveal a deeper and more profound uncertainty over what the party’s real priorities are: and that uncertainty ultimately comes from its leader. Until that is resolved one way or the other, the party’s visible fretting over the pledge will remain a running sore.
I don’t think I’ve ever failed to be entertained or challenged by a production by or at the Almeida Theatre, my local theatre, since Rupert Goold took over as artistic director a little over a decade ago.
So I was very excited to see that A Mirror, which I missed the chance to see at the Almeida, had transferred to the Trafalgar Theatre (for our many readers in Westminster and Whitehall, it really could not be closer). Georgina and I saw it yesterday.
I thought it was very well acted, brilliantly staged and it continues the Almeida’s remarkable run of success and experimentation in many ways. But I must admit I was disappointed by the script depiction of dictatorship, which I found disappointingly unoriginal and, well, not very modern. I’m not saying that every new play about autocracy should have to be better than Fear and Misery in the Third Reich, but it should, I think, at least try to do something different in subject and not just in form. (A Mirror has a very clever structure).
Anyway, I’m off to see All of Us Strangers tonight: however you spend it, have a wonderful weekend!