UK chancellor Rachel Reeves exemplifies the managerial politician. She is a technocrat to her core. She doesn’t make decisions so much as follow rules and procedures authored by experts – by those who supposedly know best.
This was all on show during Reeves’s spring statement last week. She talked of following the fiscal rules. She deferred to the experts at the Office for Budget Responsibility (OBR). Indeed, the spring statement itself seemed to have been partially authored by the OBR, with its forecasts for slower economic growth and higher public expenditure effectively forcing Reeves to make additional, last-minute cuts.
Reeves and many of her Labour cabinet colleagues act as if the fiscal rules are sacrosanct. As if there is no other way to govern. Yet up until New Labour introduced the first budget rules in 1997, countless previous governments governed without the need to consult some sort of economic rulebook or external invigilator like the OBR. Indeed, the OBR itself, which acts as a government budget watchdog, was only set up in 2011.
Moreover, the budgetary rules themselves keep changing. Reeves’s set of Treasury rules, which were announced in her October budget last year, are the 10th iteration over the past three decades. They keep changing because governments eventually find them impossible to adhere to.
Reeves is arguably the most rule-bound of all recent chancellors. After entering No11 Downing Street last summer, she quickly reinforced the sanctity of the rules and introduced a law extending the powers of the OBR, giving it greater ability to ensure politicians’ compliance. It now has a legal duty ‘to examine and report on the sustainability of the public finances’. Fittingly, Reeves described her reform as providing a ‘fiscal lock’ – a further, firmer constraint on politicians’ decision-making.
Fiscal rules and servility to the OBR may be dressed up as ‘good governance’. But the truth is they serve another, more important function. They are a means for politicians to evade responsibility. A means to dodge public accountability. They are used to signal that governments have no alternative when making harsh budgetary decisions.
Reeves’s spring statement was a case in point. She said that Labour’s original budget plans, announced last autumn, now have to be changed in accordance with the OBR’s new forecasts. That means more welfare cuts now, followed by real cuts later to most ‘unprotected’ areas, excluding health and defence.
It now looks as if the real decision-makers are not to be found on Downing Street, but on the OBR’s three-member Budget Responsibility Committee, which is in charge of the OBR’s forecasts and judgements. Reeves’s job as chancellor is simply to comply with the technical requirements of the trio’s five-year guesstimates. Regardless of what you think of the OBR’s forecasting abilities, this is a deeply undemocratic development. Elected ministers are toadying to unaccountable appointees.
Indeed, over the past few weeks, Reeves and her team at the Treasury have been busily finding new cuts and savings just to meet the OBR’s forecasts. Not that it will matter in the long-run. This spring statement has merely patched up an already fanciful autumn budget. Reeves will most likely have to revisit it again, first in the June spending review and then in next autumn’s budget.
The parlous state of Britain’s public finances is not a surprise. It is the product of a long period of sluggish growth accompanied by rampant public spending. So, although taxes as a proportion of national income are at levels not seen since the late 1940s, the revenues raised are still unable to match profligate outgoings.
Labour has tried to blame the dire budgetary challenges on the ‘new world disorder’, Donald Trump’s tariffs and of course the £22 billion ‘black hole’ in the public finances that was supposedly only discovered when Reeves entered the Treasury last summer. But that won’t wash. Before the General Election, the non-partisan Institute for Fiscal Studies (IFS) was already warning that any new government would either have to raise taxes, cut some areas of public spending or allow the national debt to keep rising.
The government needs to stop spending beyond the country’s means. Indeed, the costs of simply servicing the national debt have recently exceeded four per cent of national income – a level only exceeded in the late 1940s when Britain was servicing huge war-time borrowings.
The government also needs to raise income. Successfully boosting economic growth and tax revenues won’t be a smooth process. ‘Productivity’ isn’t like a horse that responds to exhortations. Attaining steady growth rates of two per cent or more again will require a lot more than easing planning rules and a modest increase in military spending. It will require removing the blockages of the regulatory state.
Our elected leaders need to come clean with the electorate. Having finally realised that the world is more unpredictable and dangerous than they had supposed, they need to respond in a proportionate way. They need to abandon the cowardly delusion they’ve been disseminating that Britain can spend significantly more on the military without something else giving. And they need to drop the pretence that there will be an immediate jump in economic growth to provide the resources as a result of their meagre reforms.
Above all, they need to abandon the managerialism and buck-passing. They need to ditch the fiscal rules and subservience to the OBR and start making political decisions about the direction of the UK. They’re not middle managers, they’re elected political leaders. And it’s about time they started acting as such.
Phil Mullan’s Beyond Confrontation: Globalists, Nationalists and Their Discontents is published by Emerald Publishing. Order it from Amazon (UK)
