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Rachel Reeves, Britain’s shadow chancellor, on Tuesday declared to a City audience that “stability is change”, vowing that Labour would break from the “chaos” of recent Conservative economic policymaking.
But while Reeves’s reference point is Liz Truss’s self-destructing, unfunded “mini” Budget in 2022, economists note that some of the “stability” she is offering comes from a growing alignment of Labour and Tory policy.
Labour officials shudder at talk of “Heevesian” economics — a synthesis of Chancellor Jeremy Hunt’s policies with those of Reeves — but the similarities are greater than either side would care to accept.
Despite being the official opposition, Labour has signally refused to oppose many of Hunt’s recent economic policies, including his recent cuts in national insurance rates from 12p to 8p.
Hunt set out 110 measures to boost the economy in his 2023 Autumn Statement and Labour opposed none of them. The same applied to all of the policies announced in the chancellor’s Spring Budget this year.
When it comes to financial services reform and shaking up the UK’s capital markets, Reeves found herself in agreement with all of Hunt’s so-called Edinburgh reforms.
“The big shift is that we don’t oppose for opposition’s sake,” said one ally of Reeves. Another Labour insider said: “Let’s be honest: Jeremy Hunt has stabilised things since the Truss ‘mini’ Budget.”
Paul Johnson, director of the Institute for Fiscal Studies think-tank, notes Reeves has crucially adopted Hunt’s main fiscal rule — a commitment to cut debt as a share of national income in five years’ time — further limiting her room for manoeuvre and putting continued pressure on public services.
“It’s very striking she has nailed her colours to the same fiscal mast,” Johnson said, noting that she had also embraced the personal and business tax cuts announced by Hunt.
“On tax measures and fiscal rules they look at first glance fairly similar,” he said. Johnson has previously called the rule that debt should be falling in the fifth year of the forecast period “pretty daft”.
Meanwhile, Hunt has adopted some of Labour’s policies, including its raid on tax privileges for “non-doms” and an extended windfall tax on North Sea oil and gas producers, bringing the two parties closer together.
Torsten Bell, head of the Resolution Foundation, notes that the Conservatives also raised corporation tax from 19p to 25p in 2023; Reeves is comfortable with that rate but has promised to cap it at that level.
Reeves, in her speech, stressed that Labour would do things differently: her “securonomics” agenda encompasses state investment in the green transition and improved workers rights, alongside planning reforms.
“There are enough differences to get people through a 10-minute interview,” said Johnson, but he noted that on the critical issues of tax and spending, Labour had locked itself into the same fiscal straitjacket as Hunt.
Reeves has also tried to draw a dividing line by railing against Hunt’s promise to abolish national insurance altogether, a policy she said was unfunded and would cost £46bn.
“More tunes from the Liz Truss songbook,” she said. “It’s party first, country second. Chaos over stability, recklessness over responsibility, decline over prosperity.”
But the chancellor has insisted the abolition of national insurance is a long-term project that would be fully costed, dismissing Reeves’s suggestion he has failed to learn the lessons of the “mini” Budget.
While Reeves insists her plan is very different to Hunt’s, the chancellor argues that only a Tory government would tackle welfare spending, cut taxes and resist re-regulating the labour market.
“Labour want to hug us close because they simply don’t have a plan for economic growth,” said one ally of Hunt.
Laura Trott, the Treasury chief secretary, said: “This is the same old Labour party that always lead to higher taxes, higher unemployment, the betrayal of pensioners and the hammering of businesses — with Labour’s 70 new regulations that would cost jobs and damage economic growth.”
In fact both Hunt and Reeves are offering the country a period of stability, a recognition that business and voters are exhausted after the upheavals of Brexit, Covid-19 and soaring inflation.
As the election approaches, the two parties will accentuate how their prescriptions are different while attempting to bury the inconvenient truth that on many of the big economic issues they actually agree.