Coffee House Shots
Winter for boomers
If you enjoyed the Spectator's podcast, why not subscribe to the magazine as well? You can get 12 weeks of the spectator for just £12 plus a £3 £20 John Lewis all weighttrades voucher if you go to spectator.co.uk/vulture. This is a podcast only deal and we hope you take us up on it. Hello and welcome to Coffee House Shot's Spectator's Daily Politics podcast. I'm Katie Bals and I'm joined by John McTern and Kate Andrews. So on Monday Rachel Reeves stood up at the dispatch box and said despite perhaps previously indicating there'd be no need for additional tax rises there could be more coming in autumn and in the meantime here is some spending cuts to boot. John looking back on Rachel Reeves's performance on Monday would you say it was good politics even if it perhaps wasn't a hundred percent true? Look I think it was truthful and the total gap that was found by the treasury exercise by Rachel of Treasury Lead Exercise was £35 billion but then she took off that and account for reserves, took off that and account for some of the overspend that Treasury don't believe will happen there are around $7 billion and so I think the anger was real because the gap was real and the fact that immediately after the statement but an hour after the statement the OBR said they're going to be investigating how they came to give them such misleading information for the preparation for the spring budget. I think that shows you that Rachel's touched a nerve and she's found something real and for going forward she's going to legislate for a different discipline on chancellors. She genuinely believes that the government played fast and loose with the numbers. I think she made the point pretty well yesterday and it's an important thing for her to do to say we had this inheritance from those people and she wants to tie this deficit around the neck of the outgoing government. On the specifics of the pay there's only needs to be such a big pay settlement for the junior doctors because the dispute was allowed to go on for so long. It's not a one-year pay deal in that sense and doctors are being pushed by countries all around the world particularly Australia and finally on the pay settlements. The pay review body settlements are accepted. They're there as a form of arbitration so you don't have a district of disputes. So the government, the previous government, the Tories, they accepted the pay settlements. So accepting a pay settlement is not a change of policy. It should have been budgeted for. It should have been predicted. The government should have had an awareness in its budget if you have been going to be carrying on for the rest of the year it could have done. So I think every single point that Rachel made was fair and the whole thing is this is to put a reputation on Rishi Sunak on Jeremy Hunt and the previous prime minister and chancellors of the last Tory government. And John obviously part of the reason she's going to want to do that is because in a way this is just the beginning of some quite difficult choices and we're now expecting a budget in the autumn. You know I was sat watching her press conference in the treasury last night and while Rachel did not say yes there are definitely tax rises it was almost everywhere you could say that about saying it you know completely directly. So where do you think the burden is going to fall? Because something I think we've spoken about previously on this podcast and also I think you've raced back for the magazine is that if Labour were to take government there is going to be a different emphasis in the sense of who is the main Labour voter they're appealing to? Where do MPs think things should go? So actually do you think we're about to see an intergenerational shakeup when it comes to government choices and who benefits? I think we saw the first sign of an intergenerational shift in Rachel's announcement yesterday that she was going to restrict the winter fuel allowance to those who get means sets of benefits. Now there's more than one way of arguing this point the triple lock which has been in place since the coalition government the triple lock has meant that the state pensions increased much faster than it would have done if it'd been maintained only in line with prices and so it's had a boost and that boost is probably largest as 2010 and it's going to carry on with the current Labour government. A bigger boost then the totality of the winter fuel allowance say that winter fuel allowance was one of the many devices that Gordon Bryan invented to compensate for the fact that the index linking meant that one year there was a 75p increase in the in the pension so he was buying out a public relations failure and so that I think was a sign though that is going to be winter for boomers so all of the things that boomers have expected all through their through their lifestyle that they get the upside of government spending they get the benefit of free tuition they get all the get the benefit of price increases maybe things are going to shift and the generational focus is going to be on younger voters they are both people who versed overwhelmingly for Labour but they're also people who voted overwhelmingly for other parties to the left of the Labour Party so that there's a contest put a genuine political contest around that and I think if you rule out the taxes on working people you're ruling out taxes in in effect on earned income you're not ruling out taxes on unearned income and I think that shift to wealth taxes in whatever form whether it's carried interest there's a consultation this morning I think being issued on carried interest consultation on CGT some kind of tax on housing that balance the rebalances look government finance at council tax and the windfall that people who earn their own properties have had in the last 15-20 years in the UK there's all kinds of areas but if you don't do tax on working people you do taxes or wealth taxes on unearned income taxes on housing taxes on land in that space and taxes of course on pensions in the sense that pensions have generous tax reliefs at the moment you focus when you when you rule out two-thirds of taxes as a possibility you focus on others and then you're exactly right it is a narrative around about rebalancing between the generations so that kind of thing I think is and I'm supposed to be underlying as well you saw some capital projects cancelled yesterday Boris Johnson's 40 new hospitals of which one wing has been built and so that too I think will be the treasury way of removing a capital project to balance a revenue on the spend or revenue overspend and I think that that has different implications for for growth but the taxation shift is definitely generational in my view so winter for boomers summer for millennial slash gen Z K potentially if they build some homes it's a big sum that's taken a long time to be fair probably a bit like July fell in the UK but I suppose you know Rachel used to talk to a little bit about her her government is going for growth treasury will be more growth orientated the lows that came before it's almost occasionally sanded everyone's trust site in the in the number of times they use the G word she think any of the measures you know not so much I suppose the ones we just had but there is some infrastructure canceling of plans that potential tax rises on as John was just saying things like capital gains tax potentially more on assets does any of that jar against the growth agenda I think some of it does I think even what we saw yesterday it does raise questions the labor government have suggested that it really wants investment in capital projects now they have been pretty honest about the fact that the state the taxpayer doesn't really have the money to do it at the moment and they're going to need private money and private investment which I guess justifies or fits into their narrative of why they've decided to reassess some of these capital projects as of yesterday but there's definitely a question mark around it I think the bigger question mark is over these pay raises and the 22 rise for junior doctors I think a lot of people will be sitting there saying look they deserve it they absolutely are underpaid they should get more money but why it's not tied to say some kind of outcome and increase in productivity in the public sector for example which has fallen off a cliff since the pandemic why is it not tied to something around the NHS wait list which we know people are still really really struggling with the fact that it was just sort of a blanket we're going to find the money to do the pay raises but also we have this 20 billion pound fiscal haul I think that's where it starts to jar a bit I mean housing remains a very positive narrative we're getting more details this week but yeah I think Rachel Reese is gonna have to be quite careful about her growth narrative alongside tax rises there are some taxes that are much better to avoid than others when it comes to growth she has had an incredible political moment this week I mean I thought you know if I were the Tories sitting across from her yesterday I would have been quite terrified actually Jeremy Hunt didn't look very happy he looked furious of course she's directly attacking his budgets right and you know I think I I do disagree with John slightly in the sense that I just think there is more nuance to this 20 billion pound figure there's absolutely no doubt that the Tories have been coming up very close uncomfortably close to their fiscal rule over the past few budgets and I think you could definitely make the case that there's been a lack of responsibility in being so close to your targets still promising tax cuts putting all your spending cuts in the next parliament but this was all on the table before the election the OBR was flagging this saying wow the Tories are implying that you're gonna have billions of pounds missing from departmental spending in the next parliament that's interesting the institute for fiscal studies is making this case throughout the election there were a lot of people putting these points to labor and the Tories how are you gonna fill the fiscal black hole that is between 10 to 20 billion pounds in the next parliament no one wanted to answer it for very obvious political reasons so the fact that it's new information I think is where most of the pushback comes from but it doesn't change the fact that Rachel Reeves has had a very powerful moment you know I think she was incredibly formidable she came across as somebody who was angry for the right reasons angry on behalf of the country the Tories are still struggling to come up with their response but in terms of what labor needs to do and that is to get sustained higher growth in the UK and for people to feel it before the next election that's going to come down to their own public policy and yeah Katie I think you're completely right to flag that perhaps some of what's already been announced might not sit quite right with that growth narrative and just finally John just the other week we are talking about the route over the two-child benefit cap now seven labor MPs had the whip suspended for a time-limited period of six months' length of review but there was clearly more labor MPs who would like it to be lifted and are pushing so the child poverty task force is viewed as the mechanism to get there but when you speak to MPs they also think that is going in the autumn budget do you think Rachel Reeves can really afford it about three billion pounds given the cuts and the tax rises she needs to do to apparently fill this hole so politically Rachel can't afford not to lift the two-child limit people held the line in the king's speech partly because it's so symbolic only seven revolted remember that on the third reading of the long-term benefits cuts there was a big revolt on the first reading there wasn't so quite often revolts can build and build and build it was much it was it was it was in the November of the Blair government that there was actually the biggest revolt on welfare cuts and I think I think if there isn't the lifting then people will really question what the purpose of a labor government is is it to stick to fiscal rules or is it to leave a poverty and I think that's the that's the fight within the the PLP they they believe that it will be lifted they believe that Rachel's committed the cut the government's committed to alleviating child poverty and the big question is can you make it irreversible because the child poverty was halved on the new labor but it went up massively under the the Tory government from 2010 to 2024 the the question in the mind of Rachel has to be and the whole government I think how can we show fiscal discipline how can we stick to our course without breaking the politics of the Labor Party and I think that's the issue which is that in politics in the end politics comes before rules and any mechanistic application that did the two child limit will be not just a damaging for the Labor Party and Labor government it will be emblematic of what Labor's approach to managing the economy managing the state will be and it would be a trade-off too too far I believe for the most most most MPs not saying there'll be a mass revolt but I think that people will go we genuinely believe that it will be lifted so I think if the genuine expectation of tax increases they're probably in the spaces that we've talked about and there's a genuine expectation of some relief the two the two child limit is that area and obviously people are very happy with the the lifting of the pay awards which I do think is a message to you can move on public sector productivity if you're not punitive on pay and I think that's that there's a kind of a clear philosophy of managing the government which is emerging from the things that here and Rachel are saying and doing and there's also clear politics that taxation on wealth and that alleviating child poverty those things that the shapes that are emerging that will always set the parameters for the government going forward thank you John thank you Kate and thank you for listening (upbeat music) (upbeat music)