8 July 2024

Rachel Reeves wants the Tories to own their legacy

The new Chancellor is following the example of George Osborne by citing “the mess” left by the last government.

Why did it take Labour 14 years to return to power? There are many answers to that question but one of them is how successfully the Conservatives toxified the party’s economic reputation. David Cameron and George Osborne used the weeks that followed the 2010 general election to speak repeatedly of “the mess” left by the last Labour government. This helped the Tories justify their austerity programme and entrenched their political advantage on the economy.

In her first speech as Chancellor today, Rachel Reeves will signal that she has learned from this strategy. “We face the legacy of 14 years of chaos and economic irresponsibility,” she will declare to an audience of business leaders at the Treasury.

Defining the past is as crucial as defining the future to political success: Margaret Thatcher used memories of the “Winter of Discontent” in 1978-79 to maroon Labour in opposition; Tony Blair and Gordon Brown never allowed the Conservatives to forget 1992’s “Black Wednesday” (when interest rates surged to 15 per cent). Expect Reeves and Keir Starmer to continually remind voters of Liz Truss’s economic recklessness (that she has lost her seat does not change this calculation).

But Reeves will use her speech to assail the Conservatives’ record more broadly. After entering the Treasury one of her first acts was to commission new analysis by officials of the economy’s performance over the past 14 years. Had the UK grown at the average rate of the 38 OECD countries, she will say, it would be £140bn larger. “This could have brought in an additional £58bn in tax revenues last year alone to sustain our public services,” Reeves will add. “It falls to this new government to fix the foundations” – the slogan that will be emblazoned on her lectern (calling to mind Osborne’s vow to “fix the roof”).

While the Tories used “the mess left by Labour” to justify austerity, Reeves will use her inheritance to justify pro-growth reforms. As promised, the new administration will restore compulsory housebuilding targets for councils and relax planning laws to allow building on the green belt. The speech, Treasury sources say, is designed to generate momentum on the growth agenda and indicate a determination to ensure that all parts of the country are better off by the end of this parliament.

While the last Conservative government pledged to build 300,000 new homes a year, Michael Gove abandoned mandatory targets in December 2022 following a back-bench revolt. Labour’s manifesto promised to ensure that “local communities continue to shape housebuilding in their area” but warned that “[we] will not be afraid to make full use of intervention powers to build the houses we need”.

Reeves will signal that she has no intention of resiling from this commitment. “Where governments have been unwilling to take the difficult decisions to deliver growth – or have waited too long to act – I will deliver,” she will say. “It is now a national mission. There is no time to waste.”

But while planning reform marks a break with the political cowardice of the past decade, other difficult decisions for Reeves lie ahead. During the general election, Labour was repeatedly upbraided by the Institute for Fiscal Studies and others for refusing to explain how it would ensure no return to austerity. Will Reeves raise taxes, increase borrowing or, ultimately, impose cuts? Whatever choice the new Chancellor makes, expect her to cite the mess left by the Tories.