How Labour have revealed they are much more left wing than Blair and Brown

Those following the election with an eye for detail and a long memory would have been justified in believing that Keir Starmer’s first few years as Prime Minister would mirror those of early Tony Blair. That is, a fairly tight cap on public spending, modest tax changes and a continuation of the Conservatives’ fiscal consolidation. Given the historical precedent, one can even be forgiven for believing Chancellor Rachel Reeves’ promises that she would not hike taxes the moment she entered Number 11.

She and Starmer said that, with reservations, the public spending they desperately wished they could campaign for was unaffordable at the moment, and that there was an “ambition” to do these things when public finances allowed. She campaigned on the notion that taxing private school fees and changing non-dom rules would raise £8 billion and fund some “expert” teachers (as opposed to the rest?), “GB Energy” and some NHS and mental health staff. The rest would be financed by an ambitious attempt to “go for growth”. It struck many as a realistic, believable and, although the private school taxes seemed more than a little vindictive, a broadly pragmatic approach.

Instead, within weeks she expertly took advantage of the post-election honeymoon (along with more of the same apathy that saw Starmer elected in the first place) to announce what was perhaps the fastest post-election volte-face in political memory. Since her announcement, it has begun to sink in for voters that this Labour government never had any intention of changing its stripes.

As has been widely reported, this is another attempt to manipulate the political narrative. Although the Office for Budget Responsibility had given her full, transparent access to the public books, Reeves suggested they had “discovered” a £22bn black hole in the budget. This despite Reeves telling the Financial Times before the election that “we’ve got the OBR now. We know things are in a pretty bad state. You don’t need to win an election to find that out.” Presumably she “discovered” it after spending £8.3bn on giving Ed Miliband a legacy with GB Energy, £11.6bn on climate aid and £9bn on public sector pay.

Budget hole was always there

Reeves clearly expects the public will either not notice or not care that she and Starmer feigned ignorance of our public finances in order to dodge questions about the inevitable tax implications of their spending plans during the election. They did not want to come clean with voters.

Anyone could see, as the independent Institute for Fiscal Studies pointed out, that “much of this was predictable” and that “there was always going to be a hole there”. Paul Johnson, the IFS director, added that Reeves couldn’t “honestly announce a series of tax rises in her October Budget, [and] blame them on this hole that she has just discovered”. But that’s what she’s set to do.

Well-rehearsed during the election campaign was the claim that Starmer had “no plans” to raise taxes. Better rehearsed still was Reeves’ recent statement to the Commons in which, with rhetoric that skilfully echoed Thatcher, she attempted to pin all the blame for the spending she had just announced on the Tories, but sought to claim the political credit for it nonetheless.

What was most impressive was how convincing – and convinced – Reeves was. She will be a formidable opponent for the Tories. She has even managed to rope the civil service into the tale that she never saw the figures – the same civil servants responsible for showing them to her just a month before when she was Shadow Chancellor.

Trussomonics?

The public will need some time to adjust, but soon enough they will realise that Reeves cannot be trusted. The markets are already waking up to the fact that Reeves has her own version of the health of public finances, separate to the OBR, just like Truss had. Pensioners will certainly have noticed the end of the winter fuel allowance. True to Labour form, the private sector is going to be squeezed and squeezed again to fund the near-limitless engorgement of the public sector.

The implication for the UK’s economic outlook of the fiscal measures announced so far is limited. Much more significant is what her decisions and instincts tell us about the Budget in October and for the next five years under Labour. The most important lesson is that they are not going for growth.

Within his first weeks of government, Starmer had reduced housebuilding targets for London while increasing them massively in rural Tory-held constituencies where fewer people actually want to live. It's now nimbyism with pork-barrel politics sprinkled in. The North Sea oil industry has frozen development as they wait for news on a potential end to new oil and gas licenses, which would be crushing for Scotland’s economy and pitifully short-sighted for the viability and strategic resilience of British industry and energy supply.

Gruelling five-year slog

Far from going for growth, Starmer has paid off his buddies and supporters. The unions are delighted with junior doctors’ 22 per cent pay rise that blows inflation out of the water, while fuelling it for the rest of us. There were no significant productivity concessions demanded in return.

While some hoped Labour might push through necessary but unpopular NHS reforms, it’s clear now that Labour intend to reward their biggest backers, including the unions, and lump the bill on the general taxpayer. The taxes on investments and saving will confine any hope of a pro-growth Labour party to the dustbin.

It’s hard not to despair, but Labour have now shown us their true selves – it’s up to us to believe them. This will not be a repeat of Blair’s light-touch but rather a gruelling five-year slog as the productive part of the economy has the life squeezed out of it. We should never have fallen for it.

Dr Azeem Ibrahim is the Scotland Institute’s executive chair and director of the New Lines Institute for Strategy and Policy