Back in the days of youth and irresponsibility (the early 70s for me) a group of us would meet up most Fridays and Saturdays for a drink (not many, we couldn’t afford them. An increasingly warm lager and lime for me) and a chat. One of this group was a lady called Sally Smith. Nice person. She became a teacher, and she married a fellow tacher, Graham Reeves. A few years later they had two daughters: Rachel and Ellie. They’ve done well. Rachel, an MP since 2010, is the first female Chancellor of the Exchequer, and Ellie, an MP since 2017, is Chair of the Labour Party and Minister without Portfolio.
So far so good. But…
In 2016, after the Brexit vote, Rachel Reeves started to criticise free movement between the UK and the EU. She propagated the idea that EU workers were depressing the wages of their UK equivalents. And/or ‘taking’ their jobs.
Thus, in an article in the New Statesman on 16th September 2016[1], she wrote:
“The people I met believed leaving the EU would mean less pressure on services and more money for them, because the downward pressure on wages would ease with fewer EU migrants.”
Her conclusion:
“Ending free movement has to be a red line post-Brexit.”
But she then went on to say:
“Subject to that (i.e. ending free movement), we need the greatest possible access to the single market. This will of course involve difficult negotiations because the EU will not be able to offer better terms to countries outside the EU club… We need tough negotiations to keep exports and imports tariff-free. We must also ensure the fullest possible access to the single market for the service sector.”
Now, and I am sure she knew this when she wrote this article, ‘free movement’ is one of the ‘Four Freedoms’[2] guaranteed by the Single Market. In other words, if free movement is not accepted by a nation, you cannot be part of the Single Market. In effect, therefore, Rachel Reeves was suggesting that what she wanted was all the benefits of the Single Market but none of the apparent drawbacks, drawbacks like ‘depressing British wages and losing British jobs’.
I say ‘apparent’ because, before the writing of her New Statesman piece, studies, one by the London School of Economics[3], suggested strongly that EU migration had, if anything, only a tiny impact on wages at the bottom end of the labour market but that, overall, EU migration was of much greater benefit to the economy as a whole.
A month before the referendum vote, The Guardian published an article entitled: ‘Are EU migrants really taking British jobs and pushing down wages?’[4] It was written by Alan Travis, their Home Affairs Editor.
It is an article well endowed with facts as opposed to the ill-informed opinions of her Leeds West constituents on which Rachel Reeves seemed so heavily to rely.
So, for example:
“HMRC figures also show that EU migrants more than pay their way. Those who arrived in Britain in the last four years paid £2.54bn more in income tax and national insurance than they received in tax credits or child benefit in 2013-14. The Office of Budget Responsibility has estimated that their labour contribution is helping to grow the economy by an additional 0.6% a year.”
So, if the economy is growing one would imagine there would be more jobs available for British workers and, indeed, as the article informs us:
“The Office of National Statistics says that while the numbers of EU workers in Britain has risen by 700,000 since 2013, they are outnumbered by the extra one million Britons who have gone into employment in the same period. The number of British citizens working in the UK labour force is now at the near-record level of 28 million. That compares with 3 million foreign nationals.”
It then addressed the issue of wages depressed by EU workers, most especially the wages of those on low pay. Here the study by the LSE weighs in:
“…the areas of the UK with large increases in EU immigration did not suffer greater falls in the jobs and pay of UK-born workers. The big falls in wages after 2008 are due to the global financial crisis and a weak economic recovery, not to immigration.”
The article admitted to a small negative impact on wages of low-skilled workers:
“Several studies have shown a small negative effect of migration on the wages of low-skilled workers in certain sectors in certain parts of the country, particularly care workers, shop assistants, and restaurant and bar workers. The effect has been measured at less than 1% over a period of eight years.”
Again: “less than 1% over a period of eight years.”
The LSE’s opinion was that:
“The bottom line, which may surprise many people, is that EU immigration has not harmed the pay, jobs or public services enjoyed by Britons. In fact, for the most part it has likely made us better off. So, far from EU immigration being a “necessary evil” that we pay to get access to the greater trade and foreign investment generated by the EU single market, immigration is at worse neutral, and at best, another economic benefit.”
This conclusion came from John Van Reenen, co-author of the LSE study:
“The immigration impact hinges on the post-Brexit trade deal – if we go for a deal like Norway or Switzerland, immigrant numbers won’t change much, as free movement of labour is part of the package. But if we go for a looser trading arrangement, we lose out much more from falls in trade and foreign investment.”
So, what precisely was the ‘deal’ Reeves expected the UK to do which would, at one and the same time, maintain existing trade relations with the EU whilst stopping freedom of movement from the EU? Indeed, was there ever one? And, if not, why try to make a case for it?
I decided after all this that I was not a fan of Rachel Reeves. She either didn’t do her research, or was a dissembler, a typical politician who twisted ‘the facts’ to match her particular ambitions and concerns.
Then, having contributed to the post-Brexit narrative that the EU was bad for us, she became a stalwart of the uninspiring Starmer so-called Labour Party. A party so uninspiring that, up against the worst, most incompetent government in at least 120 years, it managed to win ½ million fewer votes than Jeremy Corbyn in 2019, and a staggering 3 million fewer votes than Corbyn in 2017 (9,708,716, 33.7%, 2024; 10,269,051, 32.1%, 2019; 12,877,918, 40.0%, 2017).
Why are Labour so uninspiring?
Because they lack a vision. Yes, they aspire to manage the economy ‘better’ and be ‘fairer’ when they do so, but they have also committed themselves to a regime of fiscal rules so stultifying that only sustained levels of economic growth beyond anything this country has seen in years can make a difference.
Of course, I am sure that, back in 2019, Johnson and his pack of idiots thought ‘growth’ was the way forward. The way to pay for their much-beloved personal and corporate tax cuts with, at the same time, a modicum of growth in key areas of public services. Then came Covid and Ukraine and they were screwed. I might suggest that, in the current diplomatic climate, relying on world-wide peaceful co-existence to help generate sustained economic growth is a little on the optimistic side. And we won’t even dare delve into the potential impact of climate change.
But now, in Ms Reeves, we have a Chancellor committed to not increasing personal taxation for anyone. A commitment made, no doubt, because of Labour’s perennial fear that Tory accusations of ‘Tax and spend’ would somehow stick in the recent General Election.
In my view, they misjudged completely just how deeply unpopular were the Johnson/Truss/Sunak Tories.
The 2024 election, in the absence of an inspiring idea, was the ABC Election: Anyone But the Conservatives. Labour, except in areas with insurgent Muslim candidates, did well where they were the clear opposition. The Lib Dems did amazingly where they were perceived as the chief threat, and the Greens picked up support where they could display genuine progress in local elections.
Yes, Reform did surprisingly well too but the idea that Reform voters would have voted Tory in the absence of a Faragist candidate is simply untrue. A YouGov poll[5] showed that of their 4,117,221 vote (14.3%), fewer than 1.5 million would have voted Tory in the absence of a Reform candidate but nearly 1.2 million would have voted for a non-Tory candidate. The report on the poll is entitled: ‘Reform UK voters are not benign toward the Tories, they are belligerent’, and its first paragraph reads:
“Despite many Reform UK voters supporting the Tories in 2019, few could be convinced to vote Conservative this time round as they actively dislike them.”
Labour could, therefore, have been less risk averse on income tax, especially as it is, with the exception of increasing VAT, the easiest way of raising much needed revenue. Some might also argue that redressing the growing imbalances of wealth (and, therefore, power) through the tax system in this country are long overdue.
Now, I am not suggesting they should have proposed an ‘across the board’ rise in income tax. A targeted rise for those on higher incomes, however, would not have disturbed the average tax payer unduly. Especially if, as a quid pro quo, some of the money raised had been used to increase tax thresholds both at the bottom, with the personal allowance, and then at the level at which one moves in the higher rate tax band. Both trigger points have been fixed by Tory Chancellors for some time thus an increasing number of people are falling into the higher rate tax band as higher costs demand higher wages. It is called fiscal drag.
Polling shows quite clearly that raising these two tax thresholds would be popular with nearly 50% of respondents who say that, of all potential tax cuts, they would be the most popular[6].
Interestingly, the only one of Reform’s policies with which I had any sympathy was the raising of the personal tax allowance from £12,570 to £20,000. The effect of this would be an immediate increase in take home pay of £1,486 or 7.5%. Take out National Insurance too (an income tax by another name) and that increases to over £2,000 or 10%+.
As it is the lowest paid who have been, proportionately, most affected by the rampant food and energy price rises of the last three years, then there is a degree of fairness in giving them an immediate helping hand. The sort of helping hand you might have thought a Labour Government was in existence to provide.
Of course, one of the good things, as I understand it, about cutting taxes at the bottom is that, unlike the very wealthy, who invest it, move it offshore, or use it to find ways to pay ever less tax, people at the bottom have little choice other than to spend such money, thus generating increased economic activity. Which I believe to be a good thing. I suspect it promotes growth.
Instead, what we are getting is cuts in both revenue and capital spending. What we are getting is a lite version of George Osborne’s austerity, a policy which has done huge social and economic damage over the past 14 years.
Now, I have no problem with giving up my Winter Fuel Payment. In my view, such payments, along with several others, should long ago been subject to some sort of means testing. But there will inevitably be people on the margins who will face hardship as any means testing system has to have cut-off points and those just over the limit potentially lose disproportionately. Tapering the loss of such benefits would be sensible.
But slowing down or cancelling infrastructure projects is another matter.
Take the NHS. Paying junior doctors and other NHS staff a decent wage is essential for both retention and recruitment purposes. But that is an ongoing, year-in, year-out, ‘revenue’ commitment. Cancelling or delaying a hospital is a capital project. You can only make such a saving once. But building/improving a hospital is an investment in a community’s health. Improvements in health reduce NHS costs, mean people are at work rather than off sick, that they are generating profits and tax.
If we want to encourage business both home grown and from abroad then transport, communications, housing all need improvement and expansion.
And if we want our children to grow up with an education which suits the 21st Century and which equips them to deal with the huge issues facing the planet then we need schools fit to teach them in, and teachers enthused by their task not run down by poor remuneration, low morale, and shoddy surroundings.
That requires investment. A government is not a household trying to balance a budget. But, anyway, household budgets are nowadays very much predicated on short-term (Credit cards, loans, etc.,) and long-term borrowing (mortgages) and not on the Reeves ‘we cannot do what we cannot afford’ mentality. That approach is something the grocer’s daughter from Grantham would have approved of. It was never true then, and it is not true now.
Improvements based on economic growth are not certain. Improvements based on investment which help fuel economic growth rather more so.
If Labour pursue the Reeves economic agenda I predict they will lose the next election. Who they will lose it to I cannot say with certainty. But I suspect it will be to a nationalist English party of the far right. Then god help us all.
[1] https://www.newstatesman.com/business/economics/2016/09/rachel-reeves-mp-ending-free-movement-should-be-red-line-labour-post-brexit
[2] The Single Market guarantees that goods, services, people and capital can move freely throughout the territory of the EU (https://www.consilium.europa.eu/en/policies/deeper-single-market/#:~:text=It%20guarantees%20that%20goods%2C%20services,them%20with%20better%20job%20opportunities).
[3] https://blogs.lse.ac.uk/brexit/2016/05/11/immigration-from-the-eu-is-not-a-necessary-evil-and-does-not-drag-down-wages/
[4] https://www.theguardian.com/politics/2016/may/20/reality-check-are-eu-migrants-really-taking-british-jobs.
[5] https://yougov.co.uk/politics/articles/49762-general-election-2024-reform-uk-voters-are-not-benign-toward-the-tories-they-are-belligerent
[6] https://www.ipsos.com/en-uk/public-split-on-prioritising-tax-cuts-versus-more-money-for-public-services#:~:text=36%25%20would%20prefer%20to%20increase,%25%20amongst%202019%20Conservative%20voters).