Shadow Chancellor of the Exchequer Anneliese Dodds (Dan Kitwood/Getty Images)
Artillery Row

Blair is back. And so is Prudence

Labour will take a long view on borrowing in order to avoid being the party of big tax rises

Openly sharing his views on how the vaccine rollout should be undertaken and privately offering his advice about it to Matt Hancock, Tony Blair is seeking to rediscover his place in British public life. Inspired by how Charles de Gaulle returned to the frontline in 1958 after twelve years’ away from it, and seemingly not disheartened by his failure to derail Brexit, Blair has let it be known he has more to give.

So, Blair is back. But what of Blairism? There are obvious similarities between New Labour and the party that Keir Starmer is ruthlessly remoulding around himself. The comparison exists most obviously in the professional and rather presidential-style in which Starmer is presented and the efforts to reach out to middle England, even sharing patriotic sentiments with the readers of the Daily Telegraph. But what similarities of substance are to be found?

Thirteen months after a general election drubbing and with a pandemic that makes budgetary forecasting resemble blind-man’s buff, Starmer is canny enough to resist spraying detailed policy proposals. It will be at least 2023 (and perhaps not until the manifesto is written) before a real assessment can be offered on whether Starmerism is a Blairite or even Brownite tribute act, or has hummable compositions of its own.

One of the few policies that Starmer has articulated concerns his party’s future attitude towards the EU. On this, over the last three weeks, Sir Keir has repositioned Labour about as far away from its Blairite heritage as possible. First, Starmer made clear that Labour will inherit, rather than disavow, the Brexit trade agreement with the EU. There would be no renegotiation of the deal, let alone an effort to rejoin the bloc. Then, three days ago, he dropped Labour’s pledge to support the free movement of EU citizens to the UK.

This represents a fundamental break with the barrier-less Europeanism of the Blair worldview. Whatever Starmer – architect of the second referendum strategy – may really want, he can comprehend as well as anyone what the polling shows about attitudes in the constituencies he needs to win back. One trait he does share with Tony Blair is an appetite for power, and what needs to be said to get it.

Starmer inherits a belief, which Blair understood when he was Opposition leader, that voters will not trust Labour with their votes until they trust it on the economy. That trust is based on appearing careful with money. In the first years of Blair’s government – when state spending fell as a proportion of GDP – Gordon Brown mentioned “prudence” so often that it became a running joke that she was the chancellor’s other woman.

Prudence returned today, this time conjured-up in the soft-Aberdeenshire brogue of Anneliese Dodds. Delivering the Mais lecture to City University London’s business school, the shadow chancellor set out the framework for how Labour would create “the resilient economy.”

The Covid crisis has forced Labour to abandon its decade-long economic core message against “Tory austerity.” Rishi Sunak’s £280 billion package to subsidise and protect jobs and public services during the coronavirus recession may be many things, but it is not austere. His massive state interventions may not protect everyone – particularly the self-employed – in the manner that Labour thinks it should. But painting Sunak as a tight-fisted market fundamentalist won’t wash.

Now that the Tories have switched to becoming the party of borrowing and broad-brush largesse, Labour has dusted-down the Tony Blair playbook circa 1996-97 by emphasising the importance of fiscal responsibility. From the expensive failing of the test and trace app to buying PPE that did not work from alleged mates, Dodds mentioned ways in which Sunak’s money-hose had sprayed the stone chippings as well as the flowerbed.

Starmer and Dodds treat experts as if they were amulets.

But the core of her message was that Labour could be trusted to be responsible with the nation’s finances. Partly it could be trusted because it would leave monetary policy to the governor of the Bank of England. Starmer and Dodds treat experts as if they were amulets. And now that central bank governors are the great exponents of quantitative easing, Labour trusts them to do whatever it takes without instructions from a bunch of political know-nothings. As Dodds put it:

The Bank’s quantitative easing measures – on a scale that has seen asset holdings double in the last year, and its balance sheet set to represent half the stock of the UK’s total outstanding debt – are, clearly, within its mandate, and consistent with the Bank’s symmetrical inflation target. Andrew Bailey, the Governor has made clear that “at no point [did the Bank believe its] job was just to finance whatever debts the government issues”.

Labour used to insist that the man in Whitehall knew best. These days it puts its faith in the Old Lady of Threadneedle Street.

Of course, Dodds went on to say that fiscal policy was also vital. But she was at pains to demonstrate how important it was that the next Labour chancellor was constrained. Where “consecutive Conservative chancellors have missed every debt and deficit target they have set themselves” Labour believed in “targeting a balanced budget over the cycle” whilst in downturns seeing merit in the Institute Fiscal Studies’ suggestion of a “fiscal anchor” that “could be set to limit the amount of permanent tax cuts or further increases in day-to-day spending that is announced.”

Other constraints on the whims of Labour chancellors are to be more progressive in nature. All budget decisions will be subject to Equality Impact Assessment and, as Chancellor, Dodds promises to wield “the green pen” to ensure that “every single budget line” will be “tested against its contribution to the goal of [carbon] net zero.”

In an intriguing passage of what was a meaty speech, Dodds pointed out that the last eleven years of Tory chancellors had seen the national debt increase from £1 trillion to £2.1 trillion. She wondered aloud about the “precedents for taking a much longer-term approach to paying off significant debts – the most notable being those arising from the Second World War, which the UK only finally repaid in 2006. We should consider learning from this example, and investigate if there is appetite and the potential for the UK to issue gilts with much longer maturities.”

Anneliese Dodds did not ask us to read her lips. She is not that showy. But if Labour is going to take the long view on debt repayment it can free itself up to fight the next election committed to avoiding sweeping tax rises. Its 1997 manifesto promised that “New Labour will be wise spenders, not big spenders” and pledged not to increase income tax. Tony Blair was the future then. Is Blairism our future again?

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