‘In facing up to the country’s problems, Labour needs to draw the line with the Conservatives on tax and spend’

The Conservatives’ slide into electoral gloom has been borne out by the local elections. The Tories lack political purpose, and Rishi Sunak’s highlighting of recent cuts to National Insurance has not been the game-changer some Conservatives hoped for (however forlornly).

Yet, we have something of a paradox in British politics: While the public appear fed up with the Conservatives and are not rewarding the government’s recent economic choices, Labour is opting to avoid dividing lines with the Conservatives on many tax and spending choices, most probably over fears about the electoral consequences.

Both Labour and the Conservatives are trying to convince voters that they do not want to tax and that they cannot spend money, unless it’s for something they all agree on (past cuts to national insurance, future increases to spending on defence) and here, details on how to pay for things are a little unconvincing.

Following the last budget, Paul Johnson of the Institute for Fiscal Studies said the two main parties were engaged in a ‘conspiracy of silence’ on the fiscal choices that will need to be made.

‘Labour seems deeply worried about creating dividing lines’

Why is Labour in this position? If the argument that caution is proving to be successful is a convincing one – as opposed to voters just being very fed up with the current government – why is it convincing? There are probably many reasons, but I want to look at one in particular: a continued fear of Conservatism within the Labour Party, leading to nervousness despite Tory malaise.

Since 2010, Labour’s long process of ‘getting over New Labour’ – the subject and title of my recently published book – has seen some ups and many downs. Most significantly, Labour has been out of power for 14 years now. It desperately needs and wants to win a general election, and it wasn’t that long ago that a version of Conservatism appeared hegemonic.

Amid Conservative dismay, Keir Starmer undoubtedly projects the increased confidence of a leader preparing for office, but the same cannot be said for Labour’s confidence on some big policy choices.

It’s true that Labour has opposed some dreadful Conservative measures, including the government’s policy to remove asylum seekers to Rwanda.

However, while Labour has some interesting and distinctive ideas in economic policy and connected areas, the party seems deeply worried about creating dividing lines, principally on anything related to tax and spend – and on Brexit of course. This is not about the number of policies Labour has, rather the focus on a big party divide (and going beyond Labour’s plans on closing loopholes and tackling tax avoidance).

On tax and spend, Labour’s hesitation makes little sense in policy terms. Local authorities are going bust, and Labour’s politicians know they have been chronically underfunded. The public see public services under intense pressure and infrastructure sometimes literally crumbling, and Labour agrees we cannot go on like this. The list goes on because the state needs more money.

The language of ‘difficult choices’ is often produced in debates like this. Shadow chancellor Rachel Reeves is clear that the economic context she will inherit may be dreadful. Things could end up being somewhat more positive if policy and circumstances come together in the right way, but for now – in the political environment of Westminster, where Labour is still held to a different standard to the Conservatives on economic policy choices – going along with the government on many big things is the easier option, wrapped in the ‘difficult choices’ rhetoric. The difficult choice, right now, is saying something different.

‘There is never a perfect time to take a risk’

I very much sympathise with Labour’s predicament. The leadership is looking at big poll leads but worrying they could soften. It knows consecutive Conservative meltdowns have contributed to its proximity to power. It perceives a public that is still nervous about Labour. And it is hard to not ‘fight the previous war’, based on concern that issues like Brexit politics have not disappeared.

There is never a perfect time to take a risk, but Labour is either close to or at the point where it needs to start creating and accepting some clearer dividing lines, including drawing the line on further tax cuts – something, I hope, the party’s questioning of the Conservatives’ fantasy proposal to abolish national insurance is indicative of.

Labour should also stop ruling certain things out, and where necessary clarify where it appears to have done so, for instance saying the party has no plans to reform capital gains tax. It may well need to change taxation of capital gains in office, to raise necessary funds for public services and redistributive policies.

Whatever the trajectory for the British economy over the next decade, if we all accept that commitments made before an election mean something, Labour will need – between now and a general election – to draw the line on tax and spend.

Read our coverage of the 2024 local elections here.

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