When this Government is dead and buried, Rachel Reeves will be remembered for many things: a religious commitment to the bob, being a woman in touch with her emotions and having a surname that rhymes with thieves. Contrary to her CV, what she might not go down in history as is one of our great economists.
She was poised to be the Left’s ‘Iron Lady’, appointed to push through the tough reforms the British economy needed to finally generate some growth. There was great rhetoric – business would no longer be a dirty word and a laserlike focus on growth would save us from the declinist formula of endless tax and spend.
Fast forward a year and some change and Labour have saddled businesses with yet more tax and red tape, killing jobs and entrepreneurship, and just last week delivered a Budget that raised taxes across the board by almost £30 billion and not only refused to lower the welfare bill – another empty promise – but raised public spending. With Reeves having refused to rule out future tax rises, there’ll be more misery to come.
Calamitous economics are not restricted to the political mainstream. On Reeves’s Left, we have the revived Green Party under Zack Polanski and embattled Your Party under Zarah Sultana and Jeremy Corbyn.
Polanski recently appeared on the Rest is Politics podcast, and achieved the mammoth intellectual feat of making Rory Stewart seem reasonable. Taken to task by Stewart on the details of his plans for wealth taxation and whether he knew the difference between the national debt and deficit, Polanski was stumped, but cited the likes of Grace Blakeley and Richard Murphy as inspirations.
We know about Corbynomics – we were almost subjected to it – yet Sultana manages to be even more radical. In a statement that even baffled Owen Jones, Sultana said in an interview at Your Party’s conference that she would ‘nationalise the entire economy… even parts of the internet’. Beyond the obvious ruin this would bring to our lives, it should be noted that the only countries with nationalised ‘intranets’ are China, Iran, North Korea and Russia.
On Reeves’s Right; Reform UK and the Conservatives. There are policies to admire in both camps – the Tories have pledged to abolish stamp duty and Reform would slash corporation tax to 15% – yet both are hesitant to slay some of Britain’s most expensive golden calves. Both Nigel Farage and Kemi Badenoch campaigned vociferously against Labour’s attempted raid on the Winter Fuel Allowance – which even if it had gone through would barely have made a dent in the amount we pay for old-age benefits. Reform are also on the same page as Labour when it comes to lifting the two-child benefit cap.
There is much uncertainty on the horizon. Not in my lifetime has such a deluge of fringe figures defied our electoral system so effectively and polled this well. Many of my fellow travellers on the centre-right won’t like it, but we need the Office for Budget Responsibility more than ever.
You might think the events of the last week don’t lend this argument much credence. Almost an hour before the Chancellor delivered her Budget speech, the OBR accidentally released its Economic and Fiscal Outlook report – which contained all of the Budget’s details. Its former chair, Richard Hughes, has resigned over the error.
But this is about as far as recent cock-ups go. First, what Hughes demonstrated in stepping down over a mistake that he almost certainly had nothing to with was a sense of duty that is vanishingly rare in modern politics. Most impressive though has been he and fellow OBR grandee David Miles’s robustness in confronting Reeves and the Treasury on their shortcomings in recent select committee hearings.
Hughes’s departure is not an indictment of the OBR, but a window into how fragile Reeves’s grip on power remains. While the OBR has declared that the Chancellor did not mislead the public, the media and her cabinet colleagues over the reasons she gave for raising taxes, having to defend yourself against such an accusation is not an ideal position to be in. Rather than own up to having been caught out appeasing your backbench MPs at the expense of the nation’s fortunes, it is much easier to watch the unlucky steward of an unforeseen technical mistake fall onto the sword originally meant for you.
Yet the OBR is not perfect. Since it was established by George Osborne 15 years ago, the watchdog has regularly bungled its economic forecasts. Its Fiscal Risks and Sustainability report, released earlier this year, reviewed its initial forecast on the triple lock on the state pension, and found the cost (now set to be £15.5bn annually by 2029-30) to be three times higher than it originally predicted. Figures from Reform’s Zia Yusuf to the left-wing commentator Aaron Bastani have lambasted the OBR and called for it to be abolished, arguing that it prevents governments from making the radical changes they believe the economy needs.
But could you imagine the pandemonium if a Sultana or Polanski-led government were able to mark its own homework? The OBR does not need abolition, it needs to be updated. Take the Dutch system. The equivalent of the OBR in the Netherlands is the Centraal Planbureau (CPB). Unlike our watchdog, the CPB does not exist solely to score the government’s report card, but can also do the same for opposition parties too. By giving the OBR greater scope in this way, the public could see costed, long-term predictions for their chosen party’s economic plans. This would not suddenly turn economic forecasting into an exact science – it will never be – but it would at least give us a sense of what’s coming.
British politics is splintering: neither mainstream party have a monopoly over Right and Left as they used to, and the parties filling up the space around them are yet to experience the stress test of governance. It’s fashionable on the Right to decry the ‘experts’, and it’s true that they shouldn’t have supremacy over elected politicians, but I doubt I’m alone in thinking that I’d sooner trust the OBR than an anonymous Twitter account to predict the outcomes of a government’s plans.
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