Rachel Reeves is to provide an emergency assessment of the government’s spending inheritance before MPs leave for their summer break as she attempts to pin the blame for looming tough tax and spending decisions on the defeated Tories.
The new chancellor used her first speech since arriving at the Treasury to insist there would be no deviation from Labour’s hardline stance on reducing the national debt despite being bequeathed the “worst set of circumstances since the second world war”.
Reeves said one of her first decisions in post had been to ask officials to provide an assessment of the UK’s public spending position so that she could better understand the scale of the challenge ahead.
The assessment – which will be separate from a budget planned for the autumn – will be presented to MPs before the end of the month.
Reeves made it clear she held the outgoing government responsible for difficult choices she will face. “Our economy has been held back by decisions deferred and decisions ducked,” she said. “Political self-interest put ahead of the national interest. A government that put party first and country second.
“We face the legacy of 14 years of chaos and economic irresponsibility. I am under no illusions about the scale of our inheritance. I will need to take difficult decisions as a result of the mess left by our predecessors.”
Labour sources said the emergency statement was designed to inform MPs about the state of the economy rather than provide clues about the content of the budget. Reeves has come under pressure from the Unite union leader, Sharon Graham, since the election to tweak the rules governing debt in order to provide the Treasury with more scope to raise spending.
Reeves said: “Over the weekend I made clear to Treasury officials that the manifesto commitments that we were elected on will be kept to and they will be delivered on. That includes robust fiscal rules. And it includes our commitments to no increases in national insurance and the basic, higher or additional rates of income tax or VAT.”
Reeves said she knew there were some voices arguing that the time for caution was past and that Labour’s massive majority gave the government licence to row back on the principles of sound money and economic responsibility.
“I know that many of you aren’t used to hearing this after recent years. But I believe that the promises that a party is elected on should be delivered on in government and we will do so,” she said. “We do not take lightly the trust of voters who have been burned too often by incompetence, irresponsibility and recklessness.”
The chancellor said fixing the foundations of the economy were the first steps towards delivering stronger and sustained economic growth.
Calling the Conservatives the “anti-growth” coalition, Reeves said she was prepared to take on vested interests and accept short-term political pain to make good on Labour’s growth mission.
She said local authorities would be required to meet targets for new housebuilding in order that 1.5m homes are built over the course of the next five years. Initially it would be up to local communities to decide where homes could be built, “but the answer can’t always be no”, she said.
Nowhere was “decisive reform” needed more urgently than in the case of the planning system, Reeves said. “Planning reform has become a byword for political timidity in the face of vested interests and a graveyard of economic ambition. Our antiquated planning system leaves too many important projects getting tied up in years and years of red tape before shovels ever get into the ground.”
New Treasury analysis has found that had the UK economy grown at the average rate of OECD economies since 2010, it would have been more than £140bn larger, resulting in an additional £58bn in tax revenues last year.
Reeves said: “All governments face difficult choices and I will not shrink from those choices. Those choices are made harder, however, by the absence of the economic growth necessary to not only balance the books but also to improve living standards.”
Rain Newton-Smith, the chief executive of the lobby group the Confederation of British Industry, said: “Businesses will be encouraged to hear the chancellor speak clearly and passionately about making growth the defining priority of government and to committing to the three pillars of stability, investment and delivery needed to achieve it.
“With improvements to public services and living standards dependent on a step change from the sluggish levels of growth we’re currently seeing, it’s clear that the government needs to hit the ground running.”
Jamie Lockerbie, a planning partner at the law firm Pinsent Masons, said: “This was certainly a speech with a markedly different tone than we have been used to over the last decade. It seems likely that in the short term decisions will need to be unlocked by the deputy prime minister using her call-in powers under this new ‘interventionist approach’.
“The immediate question that springs to mind is, given the new mandatory targets, does the Planning Inspectorate have the capacity to deal with a massive ramp-up in caseload? While 300 more planners into local councils will be welcome, the reality is that it won’t be nearly enough to get the local planning authority workforce back to where it needs to be given that the number of planners in the public sector shrank by a quarter between 2009 and 2020.”
This article was written by Larry Elliott Economics editor from The Guardian and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.
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