keep the faith
It’s hard to say the honeymoon is over as it never really got underway. Mind, a rocky-start isn’t necessarily a sign of a weak government. Looking back through recent history Tony Blair stumbled with a donations row involving Bernie Ecclestone and Margaret Thatcher’s early period in office was characterised by infighting and widespread confusion. However, I do concede it does feel as if something is slightly awry with Keir Starmer’s administration and an injection of optimism wouldn’t go amiss.
Seen through the finest spectacles donors can gift it’s not a good look to find out that Sir Keir, a public servant who is paid #167,000/year, has accepted over #100,000 worth of freebies since the 2019 election, and the disclosure is a gift to both his critics and the many who wrongly claim ‘they’re all the same’. Cherie Blair used to complain that she had to spend thousands of pounds on outfits for official events, for which there was no tax-payer support, but that if she looked frumpy or threadbare she was immediately criticised by all and sundry. Obviously, being under public scrutiny is not always pleasant but you’d be forgiven for thinking that anyone with even the slightest amount of common sense wouldn’t be making it quite so easy! Gold wallpaper and all.
So, speaking of PM’s who got off to a shaky start, it now transpires that Labour has decided Liz Truss was not wrong about everything. In fact, she was right about the ends but wrong about the means. Our very own 49-day cabbage patch doll’s chosen means was tax cuts, a Tory article of faith. Tax cuts mean more money in people’s pockets and hence more demand but also higher prices and, ultimately, inflation. And interest rates very quickly followed the inflationary spike.
Labour too is pinning its hope on economic growth but its chosen means is lower interest rates. That means creating conditions in which the Bank of England will feel able to reduce them, and the surest way of encouraging this is fiscal frugality: spending less, taxing more. By adhering to Tory spending limits on the two-child benefit issue and changing winter fuel payments, Rachel Reeves is signaling to the BoE that she is not going to be profligate and is persuading the murky financial market powers-that-be that Labour can be trusted on the economy.
If she succeeds, and interest rates start to come down, good things can happen. Mortgage payments come down and we have more cash to splash. The servicing of government debt reduces so they have more to spend on public services and invest on infrastructure projects. Investment and spending become more attractive, so the economy and its GDP begins to grow. And this in turn brings in more tax revenue, giving the government even more to spend. A veritable virtuous circle of win-win. Sadly, all this takes time and confidence.
If everything goes to plan, the economic up-lift will come and we’ll all remember why we said ‘I do’ on Thursday 4th July. In the meantime, anyone in the cabinet is going to have to look as if they shop at Marks & Spencer and go to Specsavers, which is no bad thing!
