Return to spender: results unknown. Reeves gambles on long-term growth

As Rachel Reeves got to her feet in the Commons yesterday, she took a gamble. The gamble was that, in this increasingly fraught political and economic environment, the announcement of billions of pounds a year in extra funding for public infrastructure (plus increases in some government department spending) would jump-start the stalling UK economy and improve our collective lives (or at least the lives of enough of us to keep Labour in power). All of this to happen in time for when we head to the polls in the dim and distant future of 2029 for the next general election.  

Lots of numbers were thrown around - BIG numbers - in what was probably one of the most overtly political speeches made by a Chancellor of the Exchequer in recent times. Under the banner of ‘renewal’, a word much repeated during Reeves’ 45-ish minutes at the dispatch box, huge spending commitments were announced for public services and infrastructure. And who would argue against, “the biggest cash injection into social and affordable housing in 50 years,” or an extra £29bn into the bottomless public money pit that is the NHS.

But is anyone actually listening?

For those voters who did tune in and take note, Reeves’ capital-heavy statement threw up more questions than it did answers. Her jam tomorrow (or at least in the next few years) approach is more likely to be Marmite in the coming months, fuelling speculation for further tax rises in the budget this autumn. There was also a notably reduced emphasis on the less palatable parts of the statement, namely significant cuts to some departmental budgets. Coupled with tax rises, these will have a far more immediate impact on the lives of the population than the longer-term capital projects, which may or may not bear political fruit.

Another factor to consider is that British politics has never been as fragmented as it is now, and the insurgent Reform UK party has definitely got Reeves rattled. Her speech was infused with location-based shout-outs, many of which are Labour/Reform battlegrounds: Teesside, Blackpool, south Wales. Of particular note was that on more than one occasion, Reeves spoke directly across the chamber to Reform UK leader, Nigel Farage, calling him out for his support of Liz Truss’s mini budget, his party’s unfunded spending plans and controversial position on the NHS. She also told him that he should be spending less time in the pub (there was a rare bit of humour in this last point, but I, along with most others, have forgotten it).

Immigration, the economy and health are currently the big three issues in the mind of the British electorate, followed by crime, defence and housing. I’m pleased to say that all of these were addressed to some extent in the statement, but people want to see tangible change if they are to stick with or return to Labour. The economy is starting to stutter too, with a 0.3% retraction in the second quarter announced today, coupled with poor jobs and export data. These are things that people pay far more attention to than vague references to “billions of pounds of future investment” in a project that they’ve either never heard of or won’t ever be impacted by.

The general election may be four years away, but time is running out for Labour. There is going to be huge political pressure over the coming months to address the issues that make a more immediate difference to people’s lives. Like it or not, the electorate look for swift results and Labour need to win the narrative on the economy to deliver their ambitions in the long term. 

I’d hazard a guess that most of the Great British public do actually want the change and renewal being offered by the government, the question is whether they believe Labour will deliver it. And, let’s be honest, in this new age of fragmented five-party politics, they only need to convince about a third of voters to win a majority, but even that could be an uphill struggle. Reeves has taken an unusual long-term gamble in what is usually a short-term game. We, the electorate, will likely have to wait four more years for the results – that’s if we’re still listening. 

Read our analysis here for further insights into the spending review.