Rachel Reeves supports Tory tax cuts! Pull the other one…

The shadow chancellor is as unwilling to face up to fiscal reality as Jeremy Hunt – but she should beware: the reckoning is likely to happen on her watch, writes John Rentoul

Rachel Reeves, the shadow chancellor, responding to the Conservatives’ autumn statement (PA Wire)

Rachel Reeves has a strong voice and a sharp mind. So she can get through an interview in which her argument is contradicted while still sounding plausible and confident.

Thus, when Nick Robinson of the BBC pointed out that her response to Jeremy Hunt’s autumn statement tax cut made no sense, she bulldozed on to her conclusion in which she offered “real tax cuts” under a Labour government, “not the illusion we saw yesterday”.

Robinson asked her if Labour would be voting in favour of the cut in national insurance contributions announced by the chancellor in the autumn statement. “Absolutely,” said Reeves, enthusiastically, pointing out with relish that she opposed raising national insurance contributions when Rishi Sunak put them up just last year.

But point-scoring is not the same as a sensible policy for government, and Robinson said that the listeners to the Today programme, who are “grown-ups”, were entitled to know whether she intended to put up taxes in government, or to live with unrealistically tight spending plans.

Her answer was that she would close tax loopholes. This is the fig leaf that gets her through interviews. Abolishing non-dom status and charging VAT on school fees (which is hardly a “tax loophole”) provide a useful cushion of a few billion a year. Enough to mean that Labour can always promise to spend a little bit more than Tory plans – but, again, not enough to be a policy for government.

The problem Reeves has is that if, as the unimpeachable Institute for Fiscal Studies says, today’s tax cut is paid for by spending cuts after the election, she is signing up for those spending cuts.

Reeves affects to be unconcerned in private, with a source close to her saying, “the polls show us to be the party of tax cuts”. She thinks: “The argument is cutting through.” But it is the wrong argument – Labour cannot offer tax cuts any more than the Tories can, and in the long run, Labour is never going to offer lower taxes than the Tories.

Current opinion polls reflect a reaction against high taxes – the product of sluggish growth which neither party can solve; and of spending on coronavirus and energy price support, which is what the voters wanted.

Reeves may think she is pursuing a cynically effective policy for the short term, allowing the Tories to be unpopular for putting up taxes without saying what Labour would do differently, but she may have to have a better answer before the election than suggesting that growth would somehow be higher because different faces are in charge.

It could be said in defence of Reeves that she is simply fighting the dishonest politics of Hunt and Rishi Sunak, who pretend to be cutting taxes by cutting one tax while raising the overall tax burden.

But Hunt disarmed that criticism, in his interview after Reeves’s on the Today programme, by saying “Yes” to an early question about whether the tax burden was rising. He was then able to go on to sound reasonable about the tough choices ahead.

Reeves, on the other hand, sounded as if she simply denied that choices had to be made. It may be that the public mood has turned so far against the Tories that this does not matter – but it should, and it would be complacent for Reeves and Keir Starmer to think that they can bluff their way to office and sort out the details later.

Reeves claims to have enforced iron-clad fiscal responsibility on her party, insisting that no shadow minister may make unfunded spending promises. Yet Starmer himself casually made a new promise to employ “thousands” of extra mental-health support staff in schools, to be paid for by scrapping unspecified tax loopholes, when he spoke in the Commons yesterday.

It is all very well complaining that the government’s sums do not add up. But Reeves supports the most important policies announced yesterday – the personal tax cuts and the full expensing for businesses – so her sums don’t add up either. The way things are going, she is soon going to be responsible for the nation’s arithmetic. She will have to be more convincing than she was on the Today programme this morning.