Why Labour’s pledge to fix the Tory mess means tax rises

Good morning. The seeds of Labour’s defeat in 2010 were sown, at least in part, in the American mortgage market. The road to the Conservative rout in 2024 runs, at least in part, back to the global panic over coronavirus and Russia’s full-scale invasion of Ukraine.

You can say something similar about essentially every change of power in the UK (my favourite example being that the Conservative party’s defeat in 1997 owes at least a little to the creation of the exchange rate mechanism shortly after Margaret Thatcher’s first election victory in 1979).

In an interconnected world, particularly a medium-sized open economy such as ours, what happens abroad matters and what happens in the world’s most powerful democracy matters a lot.

So in many ways, the biggest and most consequential political story this year in UK politics is the one being told in the FT’s US Election Countdown newsletter, which has a special Monday edition this week.

But the story that is most in the control of British politicians is the one about tax rises and who gets blamed for them in chancellor Rachel Reeves’s first fiscal event. Some thoughts on the opening salvos in that row in today’s note.

Tax my pitch up

Labour is going to put taxes up in its first fiscal event, possibly its first couple of fiscal events. Sir Keir Starmer and Rachel Reeves will argue that they are doing it because they have to, because of the mess they inherited from the Conservatives, and they will continue to do so for the next four years. Here’s Labour’s Darren Jones:

“The Conservative government left Britain with the worst economic inheritance since the second world war. Rather than take the tough decisions, they called an election and ran away. This new Labour government will take the difficult decisions to fix the foundations of our economy so we can rebuild Britain and make every part of the country better off.”

The argument the Conservatives end up making could change quite a bit depending on who emerges as Rishi Sunak’s full-time replacement. But for the moment, what Sunak and Jeremy Hunt will argue is that they left the British economy in a great state and that Labour’s tax rises are because the government wants an excuse to make the state bigger. Here’s Hunt:

“All recent data proves the economy is now turning a corner following difficult decisions made by the previous government. With inflation at 2 per cent and the fastest growth in the G7 it will not wash for Labour to pretend things are worse than they thought in order to lay the ground for tax rises.”

What both these attack lines have going for them is that they have more than a ring of truth. The subtext of what Hunt is saying is that Labour would like the state to do more than it does currently. This is unquestionably true.

As longtime readers will know, my rough and ready theory of British elections is that when people feel like the state is a bit tattered and the public realm could do with a bit more cash, they turn to Labour, provided that the Labour party has done a good enough job of convincing them they won’t go absolutely hog-wild.

When they feel like things are about right or we need a period of public spending restraint, they turn to the Conservatives, provided the Tories have been able to convince people that they won’t take an axe to essential public services. The question for the Tories is how quickly they can get back to a point where they can have an advert a lot like this one, and have it be believable:

The problem in terms of what Hunt is saying at the moment comes back to the ring of truth in what Labour is saying about its tax rises. What it is really arguing isn’t about the state of the economy as a whole — it’s that the Conservatives made spending commitments that were larger than what they were willing to raise in tax. And this is obviously true. Just look at what I suspect will be the chart I use more than any other over the course of this parliament from the Nuffield Trust:

Sunak talked a fair bit during the election campaign about how he had committed to the NHS workforce plan — but that commitment did not extend to a willingness to set out how it would be paid for.

Labour’s vulnerability here can also be seen in this chart, in that it, too, did not set out how it would fill this gap. Now what it is doing is making great theatre out of the existence of this hole in the Conservative party’s pledges.

If the Conservatives can find something serious and believable to say about what public services they would fund and that British voters would accept, they can get back into contention quite quickly, I think. The party in 2010 had quite a lot to say about public services, whereas by 2024 it had very little to say. (What little it had left, it must be noted, it only had because of Hunt.)

The Tory party needs to engage with, essentially, whether it thinks the current NHS waiting list, the number of teachers employed, crime detection rates, the number of prison places, and everything else in the public realm that we’ve talked about before and will do again are about right. If it doesn’t have arguments on whether not just the British economy overall but the British state was in a good state in 2024, it will struggle to win a hearing or an election anytime soon, at least not without some form of external crisis hitting the UK.

Now try this

I went to Wigmore Hall twice this weekend — on Friday evening to see the Attacca Quartet, who are among my favourite modern string quartets, playing an excellent array of music. Sadly the quartet are the only group authorised to play John Adams’ second violin concerto, which he is — entirely wrongly to my mind — unhappy with. As a result, the only listening I can offer you today is this excellent recording of his first, and thus far only, canonical violin concerto.

Then on Saturday I went to the final programmes in Wigmore Hall’s African Concert series, culminating in a joint performance between the Imbube Singers and the Lichfield Gospel Choir. All the concerts were among the best I’ve ever been to at Wigmore Hall.

Top stories today

• Inflation-beating pay deals | Rachel Reeves has hinted that teachers and nurses will receive above-inflation pay rises within days despite the multibillion-pound cost to the UK Treasury at a time of straitened public finances

• Ill winds | Britain is not on course to build enough wind and solar farms to meet the Labour government’s stretching clean energy targets, according to an analysis that highlights the scale of the challenge in transitioning away from fossil fuels.

• Stop the hackers | A cyber attack affecting thousands of UK NHS patients has helped trigger action by Sir Keir Starmer’s government to force private providers of essential public services to toughen protections against hackers.