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Rachel Reeves, Britain’s shadow chancellor, told an audience in the City on Tuesday that “stability means change” and vowed that Labor would break out of the “chaos” of recent Conservative economic policies.
But while Reeves’ point of reference is Liz Truss’ self-defeating, unfunded “mini” budget for 2022, economists note that part of the “stability” it provides comes from increasing alignment between Labor and Tory policies .
Labor officials shudder at talk of “Heevesian” economic policy – a synthesis of Chancellor Jeremy Hunt’s policies and Reeves’ – but the similarities are greater than either side would like to accept.
Despite being the official opposition, Labor has clearly refused to oppose many of Hunt’s recent economic policies, including his recent cut in National Insurance contributions from 12p to 8p.
Hunt set out 110 measures to stimulate the economy in his autumn 2023 statement, and Labor did not reject any of them. The same applied to all the measures announced in the Chancellor’s spring budget this year.
When it comes to reforming financial services and restructuring Britain’s capital markets, Reeves agreed with all of Hunt’s so-called Edinburgh reforms.
“The big change is that we’re not opposing for the sake of opposing,” said a Reeves ally. Another Labor insider said: “Let’s face it: Jeremy Hunt has stabilized things since the Truss ‘mini’ budget.”
Paul Johnson, director of the Institute for Fiscal Studies think tank, notes that Reeves has decisively adopted Hunt’s key fiscal rule – the commitment to reduce debt as part of national income in five years – further limiting her room for maneuver and continuing to put pressure on politicians the public services.
“It is very striking that she is committed to the same fiscal policy line,” Johnson said, noting that she also supported the tax cuts for individuals and businesses announced by Hunt.
“When it comes to tax measures and fiscal rules, at first glance they look pretty similar,” he said. Johnson had previously described the rule that debt should fall in the fifth year of the forecast period as “pretty stupid”.
Meanwhile, Hunt has adopted some Labor policies, including the crackdown on tax privileges for “non-doms” and an expanded windfall tax on oil and gas producers in the North Sea, bringing the two parties closer together.
Torsten Bell, chair of the Resolution Foundation, points out that the Conservatives have also increased corporation tax from 19p to 25p in 2023; Reeves is happy with that rate but has promised to cap it at that level.
Reeves stressed in her speech that Labor would do things differently: its “securonomics” agenda includes government investment in the green transition and improved workers’ rights, as well as planning for reforms.
“There are enough differences to get people through a 10-minute interview,” Johnson said, but noted that Labor had locked itself in the same fiscal straitjacket as Hunt on the critical issues of tax and spending.
Reeves has also tried to draw a dividing line by railing against Hunt’s promise to abolish National Insurance altogether, a policy she said was unfunded and would cost £46 billion.
“More tunes from the Liz Truss songbook,” she said. “First it’s about the party, then it’s about the country. Chaos instead of stability, ruthlessness instead of responsibility, decline instead of prosperity.”
However, the chancellor insisted that the abolition of National Insurance was a long-term project, the costs of which would be fully accounted for, and rejected Reeves’ claim that he had failed to learn the lessons of the “mini” budget.
While Reeves insists her plan is very different to Hunt’s, the chancellor argues that only a Tory government would tackle welfare spending, cut taxes and resist re-regulation of the labor market.
“Labour wants to embrace us because they simply have no plan for economic growth,” said a Hunt ally.
Laura Trott, the chief secretary of the Treasury, said: “This is the same old Labor Party that always leads to higher taxes, higher unemployment, the betrayal of pensioners and the suppression of businesses – with Labour’s 70 new rules that would cost jobs and harm the economy. “Growth.”
Indeed, both Hunt and Reeves offer the country a period of stability, a recognition that businesses and voters are exhausted after the upheaval of Brexit, Covid-19 and rising inflation.
As the election approaches, the two parties will emphasize how different their agendas are while trying to hide the uncomfortable truth that they actually agree on many of the big economic issues.