28 October 2024

Labour has laid a trap for the Tories

The Budget will be used to cast the next Conservative leader as a threat to public services.

To govern is to choose. That is the theme that will define Keir Starmer’s speech in the West Midlands today. “Politics is always a choice,” he will say. “It’s time to choose a clear path, and embrace the harsh light of fiscal reality.”

This is an attempt to further prepare the ground for Rachel Reeves’ first Budget on Wednesday. That will feature up to £35bn of tax rises, including an increase in employers’ National Insurance (NI), a rise in capital gains tax on shares, reforms to inheritance tax and a freeze in income tax thresholds.

There is anxiety inside Labour over the likely impact of the Budget. The government is entering this event far less popular than MPs hoped after public outrage over winter fuel payment cuts and political freebies. While Labour will keep its manifesto pledge not to increase income tax, NI and VAT on “working people”, the Institute for Fiscal Studies and others will label the rise in employers’ NI a breach. (Had the party simply promised to reverse the Tories’ £20bn cut in NI, some argue, it could have swerved this row.)

But Starmer’s wager is that Labour will ultimately be judged on its ability to improve public service – and that necessitates tax rises. “They know that austerity is no solution,” he will declare of voters.

This argument is supported by polling evidence. Forty-eight per cent of voters, the National Centre for Social Research has found, favour higher taxes and spending on public services, while just 10 per cent support lower levels (42 per cent want levels to remain the same). Libertarianism, as ever, remains a minority pursuit. As strikingly, dissatisfaction with the NHS has reached a record level of 61 per cent, one reason Reeves will raise health spending by around £10bn.

“It’s time we ran towards the tough decisions, because ignoring them set us on the path of decline,” Starmer will say. “It’s time we ignored the populist chorus of easy answers.” This has been a consistent refrain of his premiership, with Starmer casting himself as the purveyor of unpopular truths. As he put it in his Labour conference speech, some communities must live close to new prisons and electricity pylons must be built overground.

Think-tankers loved those lines but is there more to Starmerism than technocratic problem-solving? The answer comes in a notably political passage in today’s speech. Referencing the Conservative leadership result this Saturday, he will say: “If people want to criticise the path we choose, that’s their prerogative. But let them then spell out a different direction.

“If they think the state has grown too big, let them tell working people which public services they would cut. If they don’t see our long-term investment in infrastructure as necessary, let them explain to working people how they would grow the economy for them.”

Starmer is making a more explicit case for the active state and borrowing for investment than New Labour did. That reflects his own soft-leftish origins and the re-emergence of big(ger) government across the world. GB Energy, rail renationalisation, stronger workers’ rights, house-building, immigration control and industrial strategy all depend on this renewed interventionism.

But Starmer is also reviving the dividing line that Tony Blair and Gordon Brown used to devastating effect. One of the benefits of being in government is that you control the fiscal baseline. A Labour opposition that plans to spend more will be accused of plotting tax rises; a Conservative opposition that plans to tax less will be accused of plotting spending cuts.

So effective was this attack against the Tories that David Cameron and George Osborne eventually agreed to match Labour’s spending plans (until the 2008 financial crisis intervened). In pre-emptively challenging the Conservatives to match Reeves’ investment plans, Starmer is learning from past victories.

What approach would Kemi Badenoch or Robert Jenrick take? As they will soon discover, to lead is to choose.