Rachel Reeves is making tough decisions – but they are the right ones

To govern is to choose, and so far this government has made the right choices on winter fuel payments and social care, writes John Rentoul

One month into the new government, and ‘stern’ is the word (Getty)

Keir Starmer said he was going to have to make tough decisions if he won the election and he has been true to his word. When Rachel Reeves, the new chancellor, announced the end of the winter fuel payment for pensioners who are not on pension credit, there was a cry of protest from the opposition side of the Commons and a shocked silence on the Labour side.

One month into the new government, “stern” is the word. Not just in the prime minister’s reaction to the rioting that followed the murder of three girls in Southport, but in the core decisions on tax and spending that will define his administration.

Starmer made a tough decision before the election to keep the two-child limit on benefits, and instead of softening it afterwards as many Labour people expected, he suspended the seven Labour MPs who voted against the King’s Speech as a protest.

The other decisions announced by Reeves on Monday also show that there will be no quarter given to the idea that Labour can ease off the fiscal responsibility talk now that the election has been won. Not only did she announce the means testing of the winter fuel payment – a payment introduced by Gordon Brown in the different circumstances of a new Labour government in 1997 – but she cancelled the introduction of a cap on social care costs that was due next year.

The discomfort over these decisions spreads far beyond the seven suspended members of the Socialist Campaign Group in the Labour Party. It includes the Steve Richards Mainstream of the party, named after my former colleague and predecessor as chief political commentator for The Independent.

Steve argues that Labour overdid the fiscal conservatism during the election campaign, and should have said that it would put up taxes: “Labour should have left enough wriggle room to reverse the national insurance cuts.” He says the party could have argued when reversing them after the election that the rate would still be lower than it was under Johnson/Sunak. “It would still have won a landslide.”

I disagree with this attempt to reverse-engineer Labour’s manifesto with the benefit of hindsight. We had the same argument after Tony Blair’s landslide: that it would have been better for Labour to have won a smaller majority on a “more left-wing” platform. No, no and a thousand times no.

You cannot be sure before an election what the result is going to be. If Starmer had gone into the election saying “We will put up taxes,” which is what Steve’s “wriggle room” amounts to, who knows how many voters he would have driven away. When Labour won only 34 per cent of the vote, this would have been a dangerous game.

And it is no use saying that public opinion is supportive of higher taxes for better public services. It really isn’t. When Paul Johnson of the Institute for Fiscal Studies criticised both main parties for not being straight with people about the state of the public finances, he might equally have criticised the British people for not being straight with politicians about their unwillingness to pay more in tax.

Much as Steve and I personally might prefer to live in a country that paid west European levels of taxes for west European quality of public services, Labour was right to fight the election on a limited-tax manifesto. And it is right not to renege on its promises now.

That means tough decisions about public spending. Given the trade-offs required, I agree with the choices that Starmer and Reeves have made. I would like the two-child limit to be lifted, but accept that it cannot be done straight away. I realise that there are some pensioners just above pension credit levels who will suffer from the withdrawal of the winter fuel payment, but the savings from those higher up the income scale have to be made.

The social care cap has been repeatedly postponed by the Conservative government, but for a good reason: that it is never going to be a priority. It would protect better-off homeowners from the unfairness of having to sell up to pay for their care, when the more urgent need is to raise the pay of social care workers, and to increase the number of places.

Less controversially, I agree with Starmer’s refusal to put a deadline on Labour’s ambition to raise defence spending to 2.5 per cent of national income. Britain already spends more as a share of national income than any other Nato country other than the US.

And I agree with stuffing the doctors’ mouths with gold, in Aneurin Bevan’s phrase. Reeves has been criticised in some quarters for agreeing inflation-busting public sector pay rises while complaining that she has inherited the finances in a worse than expected condition. But she really had no choice about that – not because of the strikes, but because it would become harder and harder to recruit and retain staff if their pay does not keep up with the private sector.

That meant it was all the more important to take such a tough and early line on holding down spending elsewhere. Reeves’s truculent message on Monday – “If we cannot afford it, we cannot do it” – was aimed both at the Tories to her right and at Steve Richards to her left.

To the Tories she was saying that they tried to do things that they could not afford, and blew up the markets. She has a point, not just about the Liz Truss interregnum, but also about Rishi Sunak’s irresponsible and unfunded scattergun promises during the election campaign.

To the Steve Richards Mainstream, she was saying that the voters won’t tolerate a tax-and-spend splurge at this point – although there might be some scope for it later if economic growth works its electoral magic.

Hers is the third way, and so far I think it is the correct way.