Rachel Reeves needs to spell out how Labour would achieve higher growth

It is all very well the shadow chancellor attacking the ‘gilded giveaway’ in the Budget but it is a diversion from setting out her plan, writes John Rentoul

Most post-Budget interviews have been free-hit zones for the shadow chancellor (PA)

Rachel Reeves has given herself little room for manoeuvre. She has followed the New Labour example of accepting Conservative tax and spending plans at the election, which means that any extra public spending has to be funded by tax rises or spending cuts elsewhere.

That is what Tony Blair and Gordon Brown did before the 1997 election, committing themselves to keep to Tory plans for the first two years of a Labour government. David Blunkett recently told students at King’s College London that, “actually we didn’t – that is a myth; Gordon found money for the day-to-day revenue in schools and massive capital investment in buildings”.

But Labour’s policy going into the 1997 election was strict. Reeves and Keir Starmer claim to be just as strict this time, saying that all promises have to be fully funded. Reeves repeated it this morning in a testing interview on the BBC, when she criticised the government for allowing inflation to drag more people into paying tax, and paying tax at higher rates. She was pressed on whether she would reverse the policy if Labour won the election, and eventually said: “I can’t say, can I, that I would reverse it because I wouldn’t be able to say where the money is going to come from.”

She has begun to admit that there are other things she cannot say either. At the weekend she admitted that her plan to borrow an extra £28bn a year to invest in a Green Prosperity Plan would be subject to her fiscal rules, which include the same rule as the chancellor, that debt must be falling as a share of the economy by the fifth year of the forecast cycle.

Jeremy Hunt appeared to make that harder for her to achieve in yesterday’s Budget, which sails so close to the wind on that particular rule that it allows only £6.5bn of leeway in year five – in other words, not enough to allow for Labour’s Green Prosperity Plan.

The closer the election looms, the more watertight Labour’s pledge to mirror the Tories’ fiscal position will become. The green policy is likely to be scaled back explicitly with the rider “as resources allow”; a New Labour favourite in opposition that Ed Balls, the former shadow chancellor, suggested Reeves would have to deploy.

And the closer we get to the election, the more Reeves will come under pressure to explain how a Labour government will secure higher growth than a Tory government, if its overall fiscal stance is the same, at least in the early years. Reeves’s only defence of her refusal to promise to uprate tax thresholds straight away was: “We’ve got to grow the economy to keep taxes for working people low.”

In other words, her stance is notionally the same as the government’s: she wants to encourage growth so that taxes can be as low as possible.

But as for how a Labour government would do better at that than a Tory one, the answers are mostly slogans and platitudes about different priorities, a green energy superpower (“as resources allow”) and stability of corporate taxation.

Which is why Hunt’s abolition of the lifetime cap on tax-free pension contributions was such a gift to the opposition. With the honourable exception of Amol Rajan on the BBC’s Today programme, most of Reeves’s post-Budget interviews have been free-hit zones for the shadow chancellor, allowed to attack the government at will for its “gilded giveaway” to the rich.

Some Conservatives tried to fight back feebly by claiming that Wes Streeting, the shadow health secretary, had been in favour of raising (not abolishing) the pension-fund limit, but he was in favour of doing so only for doctors – whereas Hunt decided to abolish the restriction for anyone rich enough to be affected by the £1m limit.

The chancellor’s explanation for favouring rich doctors and non-doctors alike on BBC Breakfast this morning was that “it is something we can introduce in two weeks’ time and we can deal with a problem”. A scheme restricted to doctors would take longer to implement, whereas this should mean that doctors will immediately feel that they can keep working in the NHS.

Maybe... but by handing Labour the propaganda gift of a tax break for the rich, for a measure that is expected to keep just 15,000 people in the workforce, according to the Office for Budget Responsibility, the chancellor has taken the pressure off Reeves to set out how she would achieve higher growth in government.