Rachel Reeves and the parable of the last one holding the parcel

The original article can be found at The Conservative Woman.

PEOPLE like parables. Even those not very familiar with the Bible can probably tell you about the parable of the Prodigal Son, or the Lost Sheep. Two thousand years later, it seems we still need simple stories to highlight complex ideas. Thus we now have the parable of ‘How Liz Truss trashed the economy’ and certainly, if the Daily Telegraph is to be believed, we have the parable of Rachel Reeves ‘running to China as the economy burned’.

The biblical parables were Jesus’s way of illustrating ideas and truths in a manner we can understand. They are eternal. The problem with these modern equivalents is that they often entirely misrepresent the truth for political purposes.

It suits the cognoscenti to believe that the wicked Liz Truss, despite the fact she was PM for only 50 days, single-handedly trashed the economy. It serves a number of purposes. It hides the numerous errors prior to her office and neatly transfers the country’s ills on to her. It was fine before ‘that woman’ is the subliminal message. 

It also acts as a grievous warning that woe betide anyone stupid enough to try to grow the economy through tax cuts. It’s a parable against the alleged follies of free market economics. It simply acts as a popular beacon to alleged folly.

Similarly we hear from the Telegraph that Rachel Reeves might be even worse than Truss, as if the two were comparable, when clearly the policy responses of the two were polar opposites. One wished to cut taxes and regulation, the other rewarded public sector workers handsomely while raising a number of vindictive and short-sighted taxes. Can they both be such bogeywomen?

What the Telegraph and others are doing with this analysis is pointing the blame at the last one holding the parcel while absolving themselves of any analysis as to why the parcel may have blown up on their watch.

To be clear, I am no fan of Rachel Reeves. I thought her Budget was illiterate. It rewarded public sector failure handsomely with no regard to productivity while allegedly increasing the tax take by some £40billion. I say ‘allegedly’ because it won’t raise anything like that much as the economy slides into recession, while causing substantial pain to working people through higher employer National Insurance charges and vindictive taxes on those opting out of state education, to give but two examples. 

It will be a clear lesson in Laffer Curve economics. Reeves is a very poor chancellor but to suggest she is the architect of the country’s economic woes is absurd. Compounding them, yes, but the architect? Absolutely not. She is merely holding the parcel as the bomb goes off.

Why so? Britain’s malaise is not new. While a case could be made that John Major started the rot, the real watershed moment came with the election of Tony Blair. He, with Gordon Brown, set the UK on a path to delusion. 

Brown promised prudence, but Labour’s inheritance was strong so at first blowing money on state interventionist legislative programmes while starting the process of raising taxes went largely unnoticed. Further, critically breaking the cultural consensus of the land which in time had real economic and social impacts that are only now being fully felt, slowly but surely corrupted the edifice.

Worse, they set up a judicial legal state surrounded by a shell of quangos and sympathetic media, academia and judiciary, thus embedding an increasingly far leftist technocratic iron grip. The tragedy was that the Conservatives, with a sort of craven crush on Blair the political master, not only embedded New Labour’s toxic legacy but greatly strengthened it. 

The policy choices over the last 25-odd years have been disastrous, but it took two major events to show that the Emperor had no clothes. The first was the 2008 global financial crisis, which arguably came about as a result in the US of Clintonesque early woke ideology encouraging banks to lend where they should not have. 

The result was a massive monetary distortion: printing an initial £450billion and, as disastrously, running a monetary policy for a decade and more of near-free money. This was the gateway to public spending delusion. 

The narrative of the then Conservative Chancellor George Osborne was of austerity, presumably to appease bond markets when the reality was that, while there was a degree of spending control, at no point did public spending fall in real terms.

The second disaster was lockdown. The response may have been largely global but the Government’s response was extreme even by deluded global standards. A further printing of another £450billion, furlough and the weakening of the work ethic, a massive expansion of the State to the tune of £200billion (in real terms), the dismantling of any semblance of border controls which has been hugely expensive in terms of the public purse and an overdrive in regulation focusing on Net Zero, DEI (Diversity, Equity, Inclusion) and massively increasing the minimum wage undermined the edifice.

The scale of this delusion, which the authors of this policy still seem not to understand, is unprecedented in peacetime. First gradually and then quickly Britain abandoned free market economics – from the point when the private sector was in the lead, accounting for over two-thirds of the economy, to accounting for just half of it today.

That productive half is increasingly hamstrung through a network of regulation and direction which would have been impossible to comprehend just a few years ago. From messing up the owned and rental housing market, the undermining of energy policy (so UK industry is paying four times as much for power as our US competitors despite the UK being blessed with substantial carbon assets) to directing the banks through extraordinary levels of regulation is inexcusable; the list goes on. Hardly a single rational decision. 

Theresa May’s ‘nasty party’ hurt and boy, did the Tories decide to appease every interest that they should not have in a craven desire to be liked by those who would never like them. Boris Johnson may have been a showman and a credible communicator but the policy response was catastrophic. Debt on debt, regulation on regulation, DEI on DEI. 

Truss’s attempt to gradually unwind this terrible mess, modest as her £40billion tax cut proposal was, was initially lauded by the City but met with horror by the very establishment who have taken the nation to the point of bankruptcy, literally. Unlike the parable of the Good Samaritan, they walked on by. 

Reeves’s Budget was bad and mad but in truth, while a bit more vindictive than most, the magnitude of public spending increase is a fraction of what Johnson was responsible for while the tax rises, according to the Office for Budget Responsibility (OBR), are in fact a magnitude of increase slightly less than Sunak and Hunt burdened us with. 

However, the harsh reality now is there is no way back for Reeves. She may stumble for a while yet but the UK economy is not going to grow, confidence is shot and with that tax receipts will stagnate just as Reeves’s spending is out of control. It is going to get rather worse for her and all of us.

The OBR sees a fiscal deficit of £124billion this year falling to £107billion, then £95billion and less. To say this is optimistic is an understatement. Reeves is going to be forced back for yet more, which will further injure the golden goose. 

There is no happy ending to this. The delusion is too great. Now, however, the US has launched a broadside with the intellectual climate changing 180 degrees. Reeves will choose the wrong partner, getting into bed with the EU, but unfortunately for her this will simply make matters worse. 

The Conservatives say ‘we told you so’. No they didn’t. They are entirely complicit in this mess. Continuing the biblical theme, a road to Damascus conversion might be welcomed but far too many in that party cannot see the cliff edge ahead.

The status quo simply cannot hold. Change will be forced. Reeves might be holding the parcel when the bomb goes off, but had she any understanding of economics she would see the writing on the wall and act with substantial spending cuts before it is forced on her, as they will be. There is no free money any more. We are all going to pay a large price without an urgent change of direction.