The post-Brexit Leave coalition, as summarised by Dominic Cummings, was always an awkward, unsteady alliance between golf club Tories in the affluent home counties, and a new crowd of working-class, former Labour voters in more deprived, post-industrial seats. The latter would be kept on board with a simple approach: “Build shit in the North”, as Cummings told reporters.
Half a decade on, Rachel Reeves has adopted a similar plan. Labour’s traditional “Hampstead and Hull” or “Hackney and Hartlepool” coalition was hastily rebuilt in last year’s general election, but only on the shakiest of foundations. And these are already cracking under the weight of political missteps, tepid growth, and an effective populist insurgency. The solution, the Chancellor hopes, is over £100 billion of capital spending, to be poured into projects across the country.
At the same time, though, the day-to-day budgets of Whitehall departments, with the exception of the NHS and defence, are to come under sustained pressure. Despite Reeves’s attempts to hide behind optimistic sleights of hand — adjusting review periods and engaging in some very creative accounting — the broad picture is of projected resource scarcity.
And so policing budgets will be reigned in just as memetic, viral moral panics over law-and-order proliferate — and just as our streets return to summer volatility. Local government will be squeezed, too, with spending powers effectively frozen after 15 years of belt-tightening. As the delivery mechanism for most of our everyday services — that’s bin collections, pothole repairs, street cleaning, and much else besides — the intensified emasculation of councils is perhaps the surest-fire way to contribute to the pervading national aesthetic of visible decline.
Meanwhile, the excruciating winter fuel U-turn serves to maintain the long-running, cross-party consensus on boomer and pensioner welfarism, while working-age adults limp on through the most sustained contraction in real wages and living standards since the Napoleonic era. The debacle has only proved that even mild reforms to the ever-growing redistributive cash transfers that placate an over-indulged but powerful grey lobby are beyond palatability.
We have been here before. That heady mix of profligacy and austerity, as the public realm deteriorates in the background, takes us right back to the Boris Johnson era — though his charismatic, old Etonian boosterism has been replaced with Labour’s pitiable vibe of disgruntled social workers handling difficult clients. Johnson and Starmer’s similarities don’t stop at unsuitability to high office: one for an indifference to detail, the other for his legalist obsession with process and convention. Nor at the fact that both have always lacked a strong worldview and relied for their victories on single-minded svengalis in Morgan McSweeney and Cummings.
The most surprising echo, here, is to be found in their fiscal and legislative programmes.
With her capital splurge, Reeves is now emulating the speedy investment uptick that was facilitated by Rishi Sunak when he was Chancellor (the “build shit” northern strategy). There’s also the editing of the Treasury’s hallowed “green book” to tilt it towards investment decisions that privilege public spending outside of London. Similarly, a half-hearted commitment to planning reform is being trotted out along with lukewarm noises about streamlining bureaucracy and eliminating quangos (which, as night follows day, will smash into the walls of an inert Whitehall blob and Nimbyish Opposition). Both voiced strong commitment to low migration, even as historically high numbers of arrivals are welcomed, mixing a focus on trade deals and “global Britain” one day, with more economic nationalism the next.
This is exactly the prospectus which earned Johnson the ire of a high Tory press which accused him of adopting “neo-Brownite social democracy”; while it earns Reeves and Starmer the Left’s charge of capitulation to a nefarious Right. The problem for Britain is that these policies are applied inconsistently and without any sustained rigour. From talk about a publicly owned Great British Rail, to GB Energy and a nationalised Scunthorpe steelworks, these interventions, like with Boris, are reactive and piecemeal, rather than being systematic and transformative. There’s a low likelihood that these comparatively puny measures will effectively combat our economic and social malaise.
“There’s a low likelihood of these comparatively puny measures effectively combating our economic and social malaise.”
Rhetorically, both Starmerism and Johnsonism are, at least on their good days, congruent with a post-Covid, Trumpian world in which capital is morphing into something less globalised, more statist, and more reliant on government and central bank largesse. In fact, both Johnson and Starmer committed to a new economic model focused on national production, regional investment and a manufacturing jobs renaissance — ending our addiction to low-wage migration and attempting to wean the Treasury off its dependency on the City.
But neither of these prime ministers, nor their respective chancellors, has or had the political will or dexterity to deliver a whole-hearted project of renewal to an increasingly desperate electorate. Financial pressures are real. And rather than a responsive, active, agile, effective state, Britain boasts a flabby, cumbersome constellation of faceless public bodies, independent agencies, recalcitrant civil servants and an alphabet soup of committees, panels and advisory councils that frustrate the ambitions of the executive.
Some might call this a healthy pluralism, but it’s beginning to resemble Kafkaesque parody, in which the electorate can sense that genuine change is out of reach because elected governments are impotent in the face of the sprawling, unelected bureaucracy. As a result, voters are now coalescing behind a tinpot mini-Caesar promising deliverance from the perennial dead end, with one last “fuck-you” roll of the Faragist dice.
The Spending Review, then, has revealed the limitations of Reeves’ approach: ever-conscious of the whims of the omnipotent gilt markets, the tentative edging towards a “post-neoliberal” growth model has been suspended — sacrificed on the altar of OBR power and Whitehall’s small “c” conservatism. Her rallying cry to rebuild Britain with a wave of capital projects will land on deaf ears.
It’s not beyond the realm of possibility that a rebuilding of the country’s physical public assets might create a wave of positive multipliers. For the past half century, we have neglected this kind of spending. We have fewer miles of road per-head than our neighbours; we have an energy grid that new power-generation projects will wait 15 years to connect up to; we have clogged up train lines operating beyond capacity; tatty, tired public buildings; a sea of potholes; broken streetlights; crumbling schools; and a creaking NHS estate.
The problem is, we no longer live in the era of free money. Post-lockdown supply shocks precipitated inflationary spirals that central bankers judged to require a suppression of aggregate demand through higher interest rates. We’re still paying a heavy price for David Cameron and George Osborne’s Whiggish aversion to the big state in the wake of the financial crisis. As the logic of austerity captured successive Tory leaders after 2008, Britain suffered a slow, real-terms, per-head squeeze on day-to-day departmental spending while capital budgets were relentlessly raided. As a result, during a historically unprecedented, post-2008 period of negative real interest rates, governments reduced capital investment in public assets.
And so today, with interest rates now returned to more normal levels, reversing the doom loop of a low-investment, low-productivity, low-wage economy requires astronomical debt-servicing costs. Already, the Government spends almost twice as much on interest payments as it does on defence. More borrowing will only add to the usurious burden. If the realised growth returns from public investments are lower than the rate of interest on UK government bonds (currently around 5%), then the sovereign debt pile will become increasingly unsustainable, and gilt markets increasingly unstable.
In a period of geopolitical uncertainty, during the chaotic decoupling of the Chinese-American hegemons, it’s unclear whether the required levels of growth from “build shit in the North” will be possible. To keep within fiscal rules, and stave off crippling cuts that the ailing public sector can ill-afford, more tax rises are near-inevitable.
I ask a senior Labour backbencher whether channelling money into capital spending will be enough to stave off Reform’s Red Wall rebellion. Their simple response: “No”. Positive effects from today’s investments won’t be felt until well into the 2030s. And many of the transport upgrades are focused in large, urban regional hubs rather than the left behind towns leading in the Farage revolt. The country craves a decisive shift, but Reeves only has Boris Johnson’s reheated leftovers on the menu. “Red Tory” Johnsonism collapsed under the weight of its own contradictions, and a historic landslide and opportunity for renewal was wasted. And so it goes with Starmer and Reeves: we continue into terminal relative decline, unable to live within our means, and with an inept political class unwilling to enact changes necessary to quash a coming electoral rebellion that will surely see them all wiped out.
