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Opinion

Has Rachel Reeves managed to protect Labour’s left flank?

08 Nov 2024 5 minute read
Chancellor of the Exchequer Rachel Reeves poses outside 11 Downing Street, London, with her ministerial red box, before delivering her Budget in the Houses of Parliament. Image: Lucy North/PA Wire

Jonathan Edwards

As the dust settles on the first Labour UK fiscal event for over 14 years, a new political landscape has developed in its wake.

The Chancellor increased government spending by 2% a year on average over the next five years. Approximately two thirds of the new spending will go on day-to-day government expenditure, while a third is directed towards capital projects.

It is a significant change of direction from what we have seen from the seven Conservative Chancellors who preceded Rachel Reeves. Ideologically it is a shift towards a more European model as opposed to the US model favoured by the Tories.

Most commentary on Budgets with good reason concentrates on individual tax policies, but for me the political consequences are worthy of equal consideration.

Clear water

The government’s first objective was to create clear water between itself and the Conservative Party. The election was won on a change narrative and Labour strategists surely realise the need to back it up with action. In this they will be helped by the Tories going further right under new leader Kemi Badenoch.

If the Tories decide to vote against the core fiscal trajectory at the forthcoming Finance Bill, they will have to explain what aspect of increased spending they are against. Are they opposed to more money for core public services, for example?

Following on from the first objective, and mission critical for Labour going forward, is to protect its left flank from challenger parties such as the Greens, SNP and Plaid Cymru. The fact that there is such a large divide between the Labour Party and the Tories helps in this regard. While it is always possible to criticise by saying the Budget didn’t go far enough for instance on wealth taxes, attacking from the left is more difficult if there is a gaping divide between Labour and the Conservatives.

I am not sure if it was intentional, but Reeves might just have managed to undermine the default SNP and Plaid Cymru position of placing themselves to the left of Labour fiscally with her policy on taxing agricultural and business assets above £1m at 20%.

Apoplectic

The SNP and Plaid Cymru are apoplectic about the policy largely because farmers are a key core vote group for both parties. However, as an aspiring estate planner myself, a typical family farm could significantly increase their tax-free allocation beyond the £1m by equalising assets and succession planning.

Remember, inheritance tax is levied against the estate of an individual, which means each person qualifies for the various allowances available. Critically,one person does not have to own 100% of a farm or the farmhouse. Some analysts believe that if assets are equalised between both husband and wife, then together they will be entitled to £3m in various reliefs before any inheritance tax is due. That’s a lot of money.

If I was a Labour candidate even in a strong farming rural constituency like Carmarthenshire I would be delighted by this emerging division line.

If readers will bear with me, on a skiing holiday in my twenties in Andorra I spent some time with a Labour leaning BBC journalist and over après ski we came to the conclusion that the key target group for both Plaid Cymru and Labour in the battle for Wales was a family called Mr and Mrs Jones from Brynaman.

The Jones’ had worked all their lives, owned their own home and were looking forward to a modest retirement. As I plotted Plaid Cymru’s dethronement of the Labour Party in the county, and after I became an MP, I always tried to think through the prism of how Mr and Mrs Jones would view a political issue. On agricultural relief, apart from the farming community who don’t vote Labour anyway, they don’t have anything to worry about.

This then creates a positional problem for parties such as Plaid Cymru and the SNP who will find themselves to the right of Labour on fiscal policy. The main significance of the Budget could well be that Reeves has protected Labour from encirclement. All their opponents are in front of them fighting for the same ground.

Spin

Much of the spin by the Chancellor centred on this being a Budget for investment. Official figures indicate that the measures in the Budget will only improve economic performance by 1.4% of GDP many years down the line.

Which brings me back to last week’s article: Brexit is costing -4% per year now. In terms of economic policy, forget the Budget – the surest way the UK Government can boost economic performance is to reduce trade barriers with Europe.

Jonathan Edwards was the MP for Carmarthen East & Dinefwr from 2010 to 2024.


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Padi Phillips
Padi Phillips
26 days ago

All fine and dandy, but the next election won’t be decided by the Mr and Mrs Jones’ of this world, homeowners and who have a modest pension plan, but by the Lewises who rent their homes, from a social landlord if they’re lucky, but from a grasping private landliord if they’re not. The Lewises also both work minimum wage, zero hour contract jobs in a factory and have to top up their income with Universal Credit and deal with all the bureaucratic nastiness that entrails. They are the lucky ones, as in the community they live in hasn’t recovered from… Read more »

Last edited 26 days ago by Padi Phillips
hdavies15
hdavies15
26 days ago
Reply to  Padi Phillips

Padi, did you use entrails deliberately at the end of your 1st paragraph ? What you have written makes sense except for my suspicion that your Lewises are among the mix of people who historically have opted out of voting especially for Y Senedd elections. They have been repeatedly misled into a “leave it to Labour” mindset or felt so alienated that they no longer have a sense of belonging. For years it has been glaringly obvious that a party or parties that can mobilise the non voting 50% or a big slice of it can tip the balance quite… Read more »

Old Curmudgeon
Old Curmudgeon
26 days ago
Reply to  hdavies15

Sadly I fear that you’re right. It’s not Putin, Trump or any other world event that threatens democracy. It’s voters feeling that their vote doesn’t mean anything that will be the cause.

Padi Phillips
Padi Phillips
25 days ago
Reply to  hdavies15

No, the entrails weren’t deliberate, just a typo. My Lewises might once have been up for voting for the proverbial donkey wearing a Labour rosette, but since at least the late 90s have been more and more of the view that voting is a waste of time, as nothing gets better for them. But, like Brexit, for which they voted, Reform speaks to them, and could well motivate them to go and vote in a Senedd election. I think we can almost guarantee that Reform will be hell bent on getting the vote out, and will expend substantial resources to… Read more »

hdavies15
hdavies15
25 days ago
Reply to  Padi Phillips

Interesting. I didn’t go into the detail yet but just an overview of the writer’s comments confirms my bias against seriously wealthy types buying up land just as a device for ducking IHT. “Mud on the boots” is a safe discriminator although those with £100+ wellies would arouse my suspicions so I’d also need to inspect their hands!

Padi Phillips
Padi Phillips
25 days ago
Reply to  hdavies15

That aspect hasn’t really been an issue in Cymru, though there are obviously real concerns about companies buying up family farms to plant trees as part of carbon offsetting (which to me has always been a scam) but when you think of agribusiness in places like Lincolnshire where landholdings are vast and government subsidies end up being massive sums plus the value of the land that could change hands with next to no tax. This is why the idea of land value tax is so appealing. It’s an idea first really promoted by Henry George who founded the economic philosophy… Read more »

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