Yesterday’s Spending Review will shape UK politics until the eve of the next election.
Arden has produced a 50 page (yes, 50 page!) briefing for our clients. Below, we’ve provided a flavour of the analysis from our Founder and Executive Chair, Jim Murphy.
To Govern is to Choose
Reeves has committed to maintaining fiscal discipline, including reducing debt as a share of GDP. This comes amid mounting pressures on public services, particularly in health, education, and local government. Reeves must balance these competing priorities while delivering on Labour’s broader missions, such as economic growth and improved public service performance.
A ‘Say-What-You-See’ Strategy
I lost count of how many towns were name-checked throughout the speech. This is a continuation of the government’s ‘potholes’ strategy where macro policy is translated into what it means locally. It is also aimed at challenging the cynicism that nothing ever changes no matter who wins.
A Third Way between Austerity and the Bond Markets
The Chancellor sought to tie last year’s Budget tax increases to specific spending commitments, and in so doing signalled a continued antipathy to austerity. But ever mindful of the Bond markets, she remained committed to her fiscal rules.
The Missions aren’t Impossible, but they are less Prominent
Labour was elected on a set of very specific policy missions. Yesterday’s speech carried no specific mention of these missions. They haven’t been ditched but do appear to be taking a rest.
They have Learned from the Democrats’ Failure
The first minute of the Chancellor’s speech felt like a Joe Biden/Kamala Harris tribute act, but every moment after that illustrated that Labour are learning the lessons from the Democratic failure. She celebrated the progress made over the past 11 months but then quickly pivoted to say, ‘But not enough people are feeling it.’ She spent the rest of her speech setting out how things need to change. This is a striking contrast to the Democrats, who spent last year celebrating economic achievements that very few people recognised.
Welfare, the Elephant in the Chamber
Yesterday was a welcome break for many Labour MPs from fretting over upcoming welfare cuts. But every announcement that they cheered, including more money for the NHS and defence, means less money for welfare. Last year’s tax increases can only be spent once. The Chancellor’s focus on security and the NHS, as well as on ‘working people’, won’t make the finances of welfare any easier.
Securonomics is Back
It was notable that Securonomics, absent from the Budget, was back, albeit in a slightly recrafted fashion. Rachel Reeves spoke of the need to ‘buy, make and sell more here in Britain’, which very much leans into the spirit of the moment. The Government’s China Strategy, to be published in the coming weeks, will be a significant guide to their Securonomics approach.
The Shortest Lasting PM casts the Longest Shadow
I know many people may hope never to hear about the £22 billion blackhole ever again. But Labour will keep punching that fiscal bruise right up to and beyond the next election.
Global Climate is about British Jobs
Gone was the high rhetoric of previous years about global responsibility on the carbon transition. And while they remain committed to being world leaders on climate, the SR confirmed that the Treasury sees this very much through the prism of economics and British jobs. Expect more of this in the months ahead.
Rachel MacReeves also goes to Wales
The next big electoral test for Labour is next year’s devolved elections in Wales and Scotland. In the former they are the under-pressure incumbents; in the latter they are the newly energised insurgents. The Spending Review announcements are the opening salvos in Labour’s long campaign for the Senedd and Holyrood.
They have a new Attack on Reform
Labour now feels a lot more comfortable about its attacks on Reform UK. The Chancellor road-tested their latest critique which is that in a few short months Reform have racked up £80billion of unfunded spending commitments. They will hope that the media start asking Reform how these pledges will be funded. Taking down some Ukrainian flags from Council HQs won’t cover it. But time will tell whether the public will treat Reform as a conventional party when it comes to balancing the nation’s finances.
Shooting for a Broad Coalition in 2029
Labour strategists continue to calibrate their 2029 electoral coalition. Judging by the places the Chancellor focused on (Milton Keynes, Birmingham Northfield, Bassetlaw, Whitehaven) they intend to vigorously defend seats against both the Conservatives and Reform with equal energy.
Combining the Strategic and the Retail
The plans are a combination of retail politics and strategic ambition. The jeopardy is that they don’t deliver the retail, such as waiting lists and housebuilding, quickly enough and that the strategic, such as Sizewell C, are decades long projects.
The Politics of the Next Spending Review
This was an important moment for the Chancellor and a crucial event for the government. After months of criticism, Reeves has re-asserted herself with Labour MPs and reconfirmed her fiscal rules. In structure, the speech was similar to some of Gordon Brown’s as Chancellor. But in substance, it was significantly different with its focus on immigration, borders, and security. These three-year spending plans take us to the eve of the next General Election. By then, they hope that their policies and a less severely turbulent world will help deliver the growth the nation needs.
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