Reeves’ central mission is in tatters
The Chancellor is the least popular person in British politics and this week’s Spending Review is unlikely to turn things around for Rachel Reeves, says Matthew Lesh
This month’s City AM / Freshwater Strategy Poll lays bare the Chancellor’s precarious position ahead of this week’s spending review.
Rachel Reeves is personally the least popular figure in British politics in the poll, with 51 per cent holding an unfavourable opinion of her and just 16 per cent having a positive one. The public’s mood is ominous, with a majority (51 per cent) expecting the economy to worsen over the next 12 months. Meanwhile, an astonishing 71 per cent are not confident in the government’s plan to achieve economic growth, leaving their central ‘mission’ in tatters in the public’s view.
The Chancellor has been eager to put a positive spin on the government’s spending agenda ahead of the review’s publication. They have highlighted a boost in energy, transport and other infrastructure spending, along with plans to reinstate the winter fuel allowance for most pensioners. Defence and the NHS are expected to have significant day-to-day increases in spending. How exactly all this will be paid for will not be clear until the budget later in the year, with the Institute for Fiscal Studies warning of “chunky tax rises”.
Nevertheless, day-to-day spending in other, ‘unprotected’ areas is expected to remain tight. This has prompted various warnings. Police chiefs say plans do not allocate sufficient resources to maintain police numbers and combat crime. This conflict has prompted Home Secretary Yvette Cooper to refuse to agree on a settlement with the Treasury in the days leading up to the statement.
Brace for further tax rises
Child poverty campaigners are continuing to push for the removal of the two-child benefit cap, but that would create a £3bn hole. A majority (52 per cent) oppose abolition, according to our latest poll. Councils across the country are complaining about their inability to deliver mandated services such as disability support and housing, and many are on the brink of bankruptcy.
At the heart of this difficulty is a Chancellor struggling to balance spending-hungry departments, record-level taxes and a national debt that is almost the size of the UK’s annual output. These pressures are only worsened by Britain’s lacklustre growth and an ageing population putting growing demands on health, social care and pensions.
The natural answer for a left-of-centre government, and the demand of many Labour backbenchers, is to put up taxes even further. But after last year’s tax raid on workers through the national insurance hike, the public is unwilling to be squeezed even further. A majority (51 per cent) of voters now prefer tax cuts, even if that means less government spending, rather than more government spending and higher taxes (35 per cent). This marks a dramatic turnaround in public opinion from recent years, when polls tended to show more sympathy for higher taxes.
Just last week, for example, the government recommitted to increasing military spending to reach three per cent of GDP by the next Parliament in the Strategic Defence Review. A majority of the public supports this goal, but most believe it should be achieved through a decrease in spending in other areas (50 per cent), rather than through higher taxes (22 per cent) or increased borrowing (12 per cent).
Beneath this immediate fiscal challenge lies a deeper problem: the growing mismatch between what the public expects of government and what the state is actually capable of delivering. After years of promises and programme expansions, trust in the state’s competence has eroded, and yet the demands placed upon it continue to grow. Every new pledge, from ‘free’ childcare to defence expansion, piles on new expectations without confronting the trade-offs required. If a government and the public want something new, what else are they willing to give up?
This is not just a budgeting issue. Without a clearer sense of what the state should and should not do, and the courage to say no, governments will keep straining to be all things to all people, and failing to deliver on any of it convincingly. The Chancellor’s unenviable task this week is not merely to make ever-more spending promises to please everybody, while ultimately pleasing nobody. What will matter is rebalancing priorities, ambitions and expectations closer to real-world capacity. If not, we can expect more disappointment and conflict in future.
Matthew Lesh is Country Manager at Freshwater Strategy