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Rachel Reeves has no vision Labour's Budget will be an intellectual void

Rachel Reeves takes on the black hole. Oli Scarff/AFP/Getty Images

Rachel Reeves takes on the black hole. Oli Scarff/AFP/Getty Images


October 30, 2024   6 mins

In the Seventies, a Middle Eastern war precipitated a global energy shock and stagflation, and a US president invoked populist pleas to the silent majority against the counterculture. As the gold standard and the post-war Bretton Woods system teetered on the brink of collapse, the monetarist economist Milton Friedman observed that “only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”

Today we have a surplus of crises but a deficit of ideas lying around. There has been no significant wage growth in the UK for more than a decade. Productivity has flatlined. The political convulsions of Scottish separatism, Corbynism and Brexit have rocked established politics. The economy has been battered by the quick succession of a global pandemic and proliferating geopolitical tremors. Trust in the political class has never been lower, as Westminster’s elites flounder around looking for the levers that say “activate new growth model”.

Against all this, Rachel Reeves’s Budget will offer up the kind of Fabian reforms one might expect from a former Bank of England bureaucrat: public accounting tweaks that alter the measures of public assets versus liabilities on the balance sheet, which should free up significantly more capital for an investment-starved public realm. After a long period in which the UK has seriously neglected its fixed assets and capital stock, an overdue focus on restorative projects with broad multipliers, in energy, transport and housing, could help nudge growth upwards.

The question is whether Labour’s incrementalism and promises of delayed gratification will satisfy a restless public. “Fixing the foundations” is hardly an alluring slogan when those economic foundations are functionally imperceptible to most people. The tangibility and immediacy of an increase in the bus fare cap will surely have more cut-through than broad-brush promises of “a decade of renewal”, especially when the British public has stopped listening to much of what politicians have to say anyway. Reeves seems intent on burning through piles of goodwill and political capital to pursue negligible cost savings.

“The question is whether Labour’s incrementalism and promises of delayed gratification will satisfy a restless public.”

Perhaps Labour’s biggest problem is the lack of a coherent narrative thread that binds its policy choices together. It won the election by successfully appearing as the inoffensive, default option against incumbents who were visibly wearied by 14 years in power. But there was no ideological bedrock underlying their campaign. There have been only vague nods towards a post-neoliberal “securonomics”, edging towards a more interventionist, activist state encapsulated by GB Energy, the National Wealth Fund, and the New Deal for Workers.

This series of scattered and languid proposals do not make up the kind of paradigm shift that would be required to trigger a genuine reindustrialisation of left-behind Britain, or a spurt of rapid, sustained growth via the energy transition — the preferred route of the so-called “modern-supply-side” advocates in Labour-aligned think tanks. It all looks rather like a reheated Johnsonism, condemned by the Right at the time as “neo-Brownite social-democracy” and “green paternalism”.

It’s doubtful whether such a vision, structured to align with “Bidenomics” in the US and designed to expand domestic green industrial capacities, could be achieved by a low-productivity service economy heavily reliant on imported manufactures and cheap labour. Even for Joe Biden, the pouring of hundreds of billions of government money into green investments and social programmes did little to improve his personal popularity ratings. America’s now cross-party consensus on decoupling and trade protectionism is unlikely to translate here: ambitious stimulus programmes are more difficult to finance when you don’t enjoy the exorbitant privilege afforded by the US dollar system. And for all the talk of creating new domestic supply chains, the turbines, solar panels and cables that will power the switch to renewables will likely continue to be made in faraway lands with more successful adherence to developmentalist industrial policy.

If not British Bidenomics, then what? It seems that the well of ideas has run dry. Yet our country wasn’t always so intellectually slothful. Half a century ago, at the last nadir of what the Soviet economist Nikolai Kondratiev would have described as a “long wave” of growth and slump, an epochal battle of ideas played out. On one side, there was a resurgent neoliberal Right with the ailing social-democratic consensus in their sights, and on the other a socialist Left advocating for an alternative economic strategy: public ownership, withdrawal from the European Economic Community, and a revitalised production walled behind tariffs, state planning agreements and price controls. This was the kind of autarkic, Left-wing economic nationalism purveyed by a young Jeremy Corbyn and his mentor Tony Benn.

In the end, the Right emerged as champions. The success of Thatcherism in presenting itself as the authentic voice of Middle England — and even attracting the support of many working-class voters in alliance with a reinvigorated City of London — means that the vision of the neoliberal Right has defined the political economy of the past 40 years.

For better or for worse, a new model emerged from the last crisis. But there has been no such luck in Britain today, on the Left or Right. Thatcherism’s defeat of the Left and its institutions was so total, and the embrace of market managerialism so widespread, that any grasping towards an alternative has been treated as utopian. We now lack the hegemonic infrastructure, the will, the capacities, and the political imagination to define a project that would contradict the whims of a faceless disciplining agent we call the bond markets.

Recent rejuvenation attempts have largely failed. Brexit, which promised a contradictory amalgamation of a free-trading Global Britain, a low-tax Singapore-on-Thames, alongside a more robust statism that insulated workers from steady influxes of migrant labour. The tension in that project is yet to be resolved. Corbynism, meanwhile, offered salvation to urban progressives, a “socialism with an iPad” that toyed with ideas such as a universal basic income, a four-day week, and supposedly new, co-operative forms of public ownership for a 21st-century economy. Its millennial socialist tendency sat alongside more traditional, social-democratic and Left-populist calls for green Keynesianism, workers on company boards, higher minimum wages, more police officers and a rejection of austerity. But despite the popularity of its individual policies, the Labour Left was widely seen as representing an effete, metropolitan activist class, obsessed with issues that were alien to most of the electorate. This was a party that could spend entire summers arguing about antisemitism, Corbyn’s former associations with militant Islamists and provisional Republicans, and ubiquitous equivocations over what constitutes a woman.

The failure of contemporary Labour Leftism, then, is rooted in the fact that the potential for social democracy is being constantly foiled by an extreme adherence to cultural ultra-liberalism on the one hand — with gender self-ID, police and prison abolition, open borders or support for reparations taken as unassailable axioms — and militant, vocal sympathy with ultra-conservative terrorist groups on the other. It’s a contradictory package almost lab-designed to repel a public that is broadly sympathetic with more anodyne promises of wealth redistribution, a more muscular statism, or investment-led growth and reindustrialisation.

If the Left is failing to conjure a workable political vision, then the Right is faring little better. The noises from the Conservative leadership contest signal little more than a desire to relitigate culture wars and restate commitments to a deregulatory agenda and small-state, low-tax principles. But elements of free-marketeer policy prescriptions have crept into Labour discourse, too, via the intoxicating panacea offered by Yimbyism. Six weeks ago, political Twitter was abuzz with talk of an essay about planning reform called “Foundations: Why Britain has Stagnated”. In 16,000 words, it offered up an answer to Britain’s perpetual stagnation: building regulations set by Clement Attlee. These ideas have become part of Westminster common sense, and Labour seems keen to pursue them. Push through planning reform, the SW1 wonks say, and we can get Britain building again, unlocking entrepreneurial animal spirits and creating a great sea of new-builds, with Barratt Britain as Keir Starmer’s Krushchevka.

Though these ideas have infiltrated the Westminster zeitgeist, nobody in the real world is listening. On the street, you’d struggle to find anyone with an opinion on planning reform. For the micro-class of policymakers and their adjuncts in the media, political advocacy and corporate consultancy, talk our byzantine planning system is ubiquitous. The Labour front bench will be praying their fixes to the issue deliver a Big Bang moment, bringing much-needed extra revenues to the Treasury.

But planning reform does not constitute a new growth model. Nor will it deliver the enormous amounts of extra money that will be required to restore services and state capacity. For the analysis in “Foundations” does not account for the real moment of divergence for Britain’s post-war growth trajectory — 2008. Since the government pumped billions into the financial system following the collapse of trans-Atlantic banking, both political parties have struggled to find a replacement for a zombie form of highly financialised capitalism. It limps on life support, delivered in the form of quantitative easing, a decade of negative real interest rates, bailouts, and now a trend for what business groups describe as “de-risking” and “crowding in”, the new “productivist” cover for corporate subsidy.

Our era of stagnation has produced extreme political ramifications as the old party system hangs on by a thread, despondency and cynicism reign supreme, and the legitimacy of the entire political class has been thrown into question by the endless failure to deliver. The Italian Marxist Antonio Gramsci would have defined it as an interregnum, a transitory period of chaotic impulses when “the old is dying, but the new cannot be born”. Previous eras of stagnation or decline have produced broad-based movements and ideas that have done away with the old and welcomed in the new. Yet today’s Budget will certainly not end our long interregnum.


Despotic Inroad is a pseudonym for a freelance writer and journalist.

DespoticInroad

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Jonathan Gibbs
Jonathan Gibbs
1 day ago

Reindustrialisation needs one thing that is not on the menu at the moment. Cheap energy. Unless our energy costs are competitive with China’s, we’re toast.

Nick Wade
Nick Wade
1 day ago
Reply to  Jonathan Gibbs

Indeed. Cheap energy is the bedrock of everything. Nothing can function without energy, and yet all the current policies are set to send energy prices into the stratosphere, for it turns out “renewables” aren’t free after all.

Mrs R
Mrs R
1 day ago
Reply to  Jonathan Gibbs

They are busy crippling the country to ensure it will never be able get back up off its knees. Toast we are.

Tony Eagleton
Tony Eagleton
23 hours ago
Reply to  Jonathan Gibbs

Lightly done toast, obviously – the energy requirements of anything approaching brown and likely to melt your butter would be far too expensive

Mark Cornish
Mark Cornish
23 hours ago
Reply to  Jonathan Gibbs

Totally agree. Instead we have ‘the saviour of the planet’, Ed Milliband, tear-arsing around and doing the exact opposite! The quicker that we lurch towards the lie that is ‘net zero’, the sooner we will be bankrupt. Cheap and, just as important, reliable energy is the only way we will be able to compete on the world stage.

Norfolk Sceptic
Norfolk Sceptic
21 hours ago
Reply to  Jonathan Gibbs

We need Wealth Creation, not even more Administrators, and Managers of Administrators, distributing the ever decreasing Wealth to more and more Wealth Sinks, and Victims, and Enemies.

Don’t be surprised: it’s what Socialists do.

Dylan B
Dylan B
1 day ago

I’m amazed at how lazily journos throw around references to ‘culture wars’ as if it’s nothing.

It is everything. If you can’t define the simple. If you can’t protect the vulnerable. If you can’t police adequately. How the %#$& are you going to fix economies and deal with complex geopolitics?!

This version of Labour is a farce. A leader so clearly out of his depth he makes Johnson look good. And that’s really depressing.

And the way that the minimum wage keeps increasing and wages outside of that continue stagnate, we will all find ourselves on the minimum wage by the end of this government’s term. And Starmer will have his socialist utopia. Joy!

RA Znayder
RA Znayder
1 day ago
Reply to  Dylan B

Is it though? Or is it precisely that meme where an oligarch orders someone to ‘introduce the people to identity politics’, after seeing the Occupy Wall Street protests outside?
In other words, a distraction from the underlying issue.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
1 day ago
Reply to  Dylan B

And Reeves seemingly lies on her CV about her experience as an “economist” sand about being a chess champion
https://order-order.com/2024/10/24/rachel-reeves-bank-economist-myth-busted/
https://order-order.com/2024/10/15/investigation-rachel-reeves-british-chess-champion-myth-busted/

UnHerd Reader
UnHerd Reader
20 hours ago

I think she lied about being chancellor of the exchequer, too.

Ian Barton
Ian Barton
1 day ago

There isn’t a “deficit of ideas around”. There’s a deficit of politicians who can understand – and will also commit – to those ideas.

Norfolk Sceptic
Norfolk Sceptic
21 hours ago
Reply to  Ian Barton

There are too many Arts and Humanities graduates in the political bubble. They have no idea what industry needs to flourish. But we can’t have that, anyway, as it will make the society unequal!

They are clueless, and so are their advisors. And who chose them? 🙂

David Lindsay
David Lindsay
1 day ago

In 1947, Hugh Dalton had to resign as Chancellor of the Exchequer because minutes before delivering his Budget speech, he had let slip to a journalist that certain taxes would be changed, causing that story to appear in the evening papers while he was still speaking and before he had informed the House of Commons. These days, readers and MPs alike would count themselves lucky that it had been true, since not only has the Government already announced five new freeports to the media, but those turn out never to have existed at all.

On Monday, Keir Starmer’s harsh light of fiscal reality bent around the £22 billion black hole of Rachel Reeves to reveal an extra £1.4 billion for schools, or a whopping 50 grand each; £500 million for social housing, enough to build a couple of thousand homes; £240 million to help people back into work, or about 80 quid for each person currently jobless; and a 50 per cent increase in bus fares.

All on the day that Sir Lindsay Hoyle read the riot act over the announcement of policy in the media before its announcement to the House. Today, he should name both Starmer and Rachel Reeves, requiring them to leave the House immediately and not return for the remainder of the day’s sitting. No Prime Minister’s Questions that day. And no Budget speech, effectively daring the Government to publish it anyway and see what would happen.

The national minimum wage goes back to 1998. It has increased since then, but by nothing like the increase in economic output per hour worked in the United Kingdom; in short, productivity. This is underpayment on a colossal scale, and underpayment is theft.

When the minimum wage goes up by 77p per hour, then 15.4p will be deducted from that in income tax, and 6.16p in employee’s National Insurance contributions. There will be a tapered deduction of up to 55 per cent in Universal Credit, and a fiscal drag of 2.5p due to the freezing of the Personal Allowance. So a full-time worker on minimum wage will keep fully 22 of those 77 pennies. £1.76 per day.

But wait. Her bus fare will be going up by two pounds per day, one pound to get her to work and one pound to get her home, leaving her 24p per day worse off even before things like the huge increase in energy costs, all under a Labour Government that had inherited an economy that had grown by £29 billion in the first six months of 2024, after which growth in Gross Domestic Product has simply ceased.

Hugh Bryant
Hugh Bryant
23 hours ago
Reply to  David Lindsay

Meanwhile the value of your house will probably increase by £1000 pw this year. That’s where the wealth has gone. If Labour do not today make any attempt to remedy that then they don’t deserve to survive in government until Christmas, let alone until 2029.

Stephanie Surface
Stephanie Surface
22 hours ago
Reply to  Hugh Bryant

Don’t worry the gain will also be taxed to the hilt, especially when you leave the house to your children.

RA Znayder
RA Znayder
1 day ago

Of course there are other ideas lying around but they are ignored or ridiculed because the status quo managed to stay in power. Even after 2008 when they should have lost credibility. The “There Is No Alternative” doctrine remains strong.
But you have take the risk and listen to the people with completely different ideas. This is something we can learn from Thatcher and people like her. The ‘proto-neoliberal’ Chicago and Austrian school economists were seen as strange fringe reactionaries but because of vocal and powerful advocates they gained mainstream acceptance.
Thatcher also knew her enemies. Once in power she attacked the powerful unions head on. Today I think the equivalent of unreasonable unions are the manegerial and financial industries. They are the big beneficiaries of the neoliberal welfare state. They were always protected against market discipline. Since 2008, every time something happens central banks and governments print money right into their assets. Not only is this precisely what makes the stagnation much worse, this rent seeking class will naturally also fight to protect their position.

Dylan B
Dylan B
1 day ago
Reply to  RA Znayder

It goes beyond ideas. It’s bravery. Our politicians are cowardly.

Santiago Saefjord
Santiago Saefjord
23 hours ago
Reply to  Dylan B

Our populous is equally cowardly, politicians are just the hat we are wearing on any given occasion

AC Harper
AC Harper
1 day ago

From the RSA website:

‘Producer capture’ is one of the key concepts imported by New Labour from the nostrums of neo-liberal economics. It describes the process whereby the goals of an organisation reflect the interests and prejudices of its employees (the producers) rather than those it is supposed to serve (the consumers, customers or citizens).

I’d argue that the NHS is one such organisation, that machine politics is another set of examples, and the two main political parties are currently intensely focused inwardly on internal struggles.
As a consequence our politicians have no interests in ‘vision’ or ‘goals’ beyond providing ‘status points’ in their party struggles. The views of the electorate are an embarrassing distraction from the ‘real business’ of politics.

Richard Pinch
Richard Pinch
1 day ago

It’s disappointing how impoverished the debate over taxes and benefits is. There are some points which, whatever one’s position on them, really need to be a well-understood part of the public discourse.

There are three main reasons for levying taxes. (1) To raise the revenues needed to run the state’s functions and services; (2) to redistribute wealth from people who are well off to people who aren’t; (3) to penalise and discourage unwanted behaviour. Is it really impossible for a Chancellor to state which taxes, current or proposed, fall into which category?

There are two main ways of distributing benefits. (1) As of right, universally, or on the basis of universal criteria such as age; (2) to selected recipients. This has been true ever since the introduction of benefits, no later than Lloyd George’s Old Age Pension in 1909. The pros and cons of each method are rediscovered by every chancellor as if they were entirely novel. Had they really not thought about them beforehand, and come prepared to articulate their chosen position?

Judy Englander
Judy Englander
1 day ago

I’m puzzled why a freelance writer and journalist commenting on UK politics feels the need to use a pseudonym.

AC Harper
AC Harper
1 day ago
Reply to  Judy Englander

There’s no need of course, until you step on someone’s toes and they send the Police around to discuss ‘hurty words’. Another example of ‘soft censorship’ maybe?

Richard C
Richard C
23 hours ago
Reply to  Judy Englander

Maybe because it’s not a very good article?

Christopher Barclay
Christopher Barclay
1 day ago

“We now lack the hegemonic infrastructure, the will, the capacities, and the political imagination to define a project that would contradict the whims of a faceless disciplining agent we call the bond markets.” This is only the case because the UK has run a persistent current account deficit since 1997 and because the UK does not have the export sectors that would benefit were there to be a run on the pound.

andy young
andy young
23 hours ago

 “The noises from the Conservative leadership contest signal little more than a desire to relitigate culture wars and restate commitments to a deregulatory agenda and small-state, low-tax principle”
Well that’s largely what I want. Much more, of course, but, although I think Jenrick is mostly noise, Badenoch is more. Much much more. And is the only person I can see in UK politics today with the gumption to fundamentally change things for the better.

Last edited 23 hours ago by andy young
UnHerd Reader
UnHerd Reader
20 hours ago
Reply to  andy young

She may have the gumption, but does she have the strength ?

Richard C
Richard C
23 hours ago

I kept hoping that if I continued to read this dross that it would get somewhere, but it didn’t.
The inconsistencies and the half-baked misunderstandings didn’t reveal any basic actual insight.

Steve Gwynne
Steve Gwynne
1 hour ago

There is no getting around the fact that we have reached peak growth. The more an intended economic policy attempts to avoid this reality, then the more it will fail.

The only plausible explanation as to why governing parties don’t acknowledge this fact is because it wants to keep financial debt markets sweet.

It doesn’t help to continue growing an unsustainable population, especially when the material needs of growing population need to be sourced from abroad with little to give in return.

The grand narrative that is required is one in which the country is united by its efforts to significantly reduce down our debts, especially the public debt. This means a national conversation by which to achieve that which foremost requires an acknowledgement of post growth dynamics.

Thatcher was saved by cheap oil from both national (North Sea) and foreign reserves. The financial crisis was saved by fracking, shale and tar sands. There are now no cheap reserves left save what remains in the Middle East which is why China is fully exploiting coal, the only hydrocarbon that will be plentifully around by 2050.

Economic production is highly correlated with hydrocarbon use.

https://link.springer.com/article/10.1007/s10584-009-9717-9#auth-Timothy_J_-Garrett

So without dense energy sources, there is no significant economic production. However governing parties are afraid to tell the truth. In turn, they are unable to be transparent about the social ramifications of economic decline.
Instead we have layers upon layers of conflict management as cultural faultlines fracture.

With lies and deceit the mainstay of Western democracies nobody really knows the truth such that a terrorist can be cast as a traumatized refugee or a community that feels threatened by traumatised refugees can be cast as far right fascists.

So the place to start is the economic truth since diverging from economic truths can only lead to a relativistic post truth hell of imagined friends and foes as actual economic prosperity declines.