The main point of Rachel Reeves’ speech in the House of Commons was to hammer home to voters Labour’s claim that the Conservatives had let the economy spiral out of control – an argument they hope to continue using until the next election.
Rachel Reeves’ statement on Monday was about using the past to justify the future, marking the most significant departure from the governing platform that Labour spent months preparing and communicating to voters.
The general election was just a month ago, but already there was a chancellor unveiling a raft of massive spending cuts, above-inflation pay bonuses and announcing tax rises from October – none of which were detailed in Labour’s manifesto.
As well as showing a government willing to go far beyond its campaign promises, the Commons speech also revealed what happens when the chancellor is forced to make difficult concessions.
Ms Reeves promised to pay billions more in public sector wages totalling £9 billion, not just awarding of 5.5% prizes suggested by independent review bodies, while also Reduction of fuel payments for winter of all but the poorest pensioners.
A weighty and substantial package from the chancellor, but did it overshadow the main political imperative? And did the decision to spend £9bn on higher public sector pay undermine her claim that finances are extremely tight and tougher choices are needed?
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The main point of the speech was to hammer home to voters the claim that the Conservatives let the economy spiral out of control in the months leading up to the election, making an argument they hope to use again in the next election.
Within Whitehall, some wanted to spread the news for more than a day: establish the size of the black hole and publish the letter from the Office for Budget Responsibility revealing they are investigating who knew what on Monday, and then leave the spending cuts for a later date.
However, I was told that officials had warned them that this would not be prudent: one source said the Treasury feared the situation was so bad that there could be a market backlash if they did not announce spending cuts immediately.
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As a result, it all came together on Monday, allowing critics to play up the odds – putting the two million pensioners who Age UK says cannot afford to lose this benefit ahead of the millions of private sector workers whose wages have been cut by inflation. Let’s see if this muddies the waters.
Make no mistake, this is not the worst thing Ms. Reeves will have to announce.
Of the £21.9bn black hole, spending cuts will generate only £5.5bn this year.
This means £16.4bn will need to be found this year alone, which will have to come from tax rises, welfare restrictions and spending cuts announced in the budget on 30 October.
This is a considerable sum, and it does not take into account the domino effect of deficit spending in future years and how it should be accounted for.
Reeves also confirmed that the big one-off compensation schemes, such as the tainted blood and Post Office scandals, which will leave multi-million pound holes that need to be plugged, have not yet been taken into account. None of this sounds pretty, so he hopes voters have taken notice and accepted the sombre tone.
The most important question, however, is when this government will be able to turn around and start announcing good news.
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Monday’s announcement marked – in many ways – the Treasury’s application of conventional accounting to solve problems, shelving highway projects and construction programs to balance the books.
But could this be seen as short-termism and hurt the growth of a government that wants to be seen doing everything it can to generate tax revenue in the short term to better fund public services in the future?
In the Parliament that began in 1997, Tony Blair’s government was able to continue to blame its Conservative heritage until the next election in 2001.
On Monday, Reeves played Gordon Brown’s role in that task, also with an eye on the upcoming election. Was the message as clear and consistent as that? Will he be able to protect her when the political honeymoon is over?
