Labour came to office promising to deliver growth. Success, it suggested, would enable it to keep taxes down while improving public services. It anticipated this recipe would persuade grateful voters to give it a second term in 2029.
So far, the public have largely been unimpressed by the Government’s efforts. According to Ipsos, 67 per cent think the economy will get worse over the next year, while only 13 per cent believe it will improve, a net economic optimism rating of minus 54. That is well down on minus 10 last July. Voters are now more pessimistic than at any time since the Liz Truss fiscal event in autumn 2022.
YouGov report that 76 per cent think the Government is handling the economy badly, up from 44 per cent immediately after the election. Even 54 per cent of those who voted Labour in July feel that way. Between them, these figures help explain why Labour’s average poll rating stands at just 25 points, 10 points down on the very modest tally of 35 per cent the party secured last July.
Now, yesterday’s Spring Statement from Chancellor, Rachel Reeves, and the accompanying forecast from the Office for Budget Responsibility (OBR) has underlined just how formidable a challenge Labour has in achieving the growth that might win them a second term.
The OBR expects that this year the economy will grow at only half the rate anticipated just six months ago, thanks to higher than expected interest rates and energy costs, a decline in business confidence, and still ailing productivity improvement. As voters had already noticed, the economy has been moving further away from the goal Labour has set itself.
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Reeves has undermined the moral case for welfare cuts
Read MoreTrue, the OBR anticipates things will improve thereafter, and that by the time of the next election, the economy will still have grown as much as previously anticipated. But, at an average of just 1.8 per cent a year, the anticipated growth of the economy over the next few years is well below the near 3 per cent figure New Labour delivered before the financial crash – and is no better than the Conservatives’ record between 2010 and 2019.
Still, in one piece of good news for Labour, the OBR has now taken into account the estimated impact on growth of the Government’s plans to deregulate planning and improve the country’s infrastructure, a policy expected to deliver over a million new homes.
These plans are central to Labour’s growth strategy. Nevertheless, while the OBR believes they will do some good, they reckon their delivery will, by 2029, increase the economy by just 0.2 per cent. Labour’s planning reforms, costless though they are to the Government, are, this side of the next election at least, unlikely to prove the magic bullet ministers have sometimes implied.
Meanwhile, despite Labour’s wish to bring them down, taxes will increase over the next two years to reach a record 38 per cent of the economy and then stay at that level thereafter. Little wonder that, despite a greater than anticipated improvement in recent months, household living standards are expected to rise on average by just half a per cent a year between now and 2029.
Reeves was keen to trumpet that this meant the average household would be £500 a year better off by 2029. However, the rate of increase tails off in the second half of Parliament. Consequently, many “working people” might still be left wondering whether Labour really have delivered sufficient growth to deserve a second term.
Meanwhile, the OBR report is full of warnings that things may not even turn out as well as they are currently forecasting, including not least as a result of a Trump-instigated tariff war.
In the short term, however, the Government faces a more immediate political challenge. Reeves’s primary task on Wednesday was to deal with the adverse impact of the economy’s stuttering performance on the Government’s finances.
Her big decision was to close over one third of the £14bn hole in her fiscal arithmetic by reducing welfare benefits, primarily by reducing the entitlements of those with a health condition or disability.
Spending money on welfare is far from being the most popular form of government spending. New figures from the latest British Social Attitudes survey show that just 2 per cent regard spending more on social security as a priority.
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Starmer will stick by Reeves - he has no other choice
Read MoreHowever, people with disabilities (and their carers) are widely regarded as among more worthy recipients. Even before the Chancellor got to her feet and extended the cuts first announced last week, More in Common found that as many as 44 per cent feel they are “too harsh”, including 42 per cent of those who backed Labour last July.
The same poll also suggested voters were more inclined to regard the cuts as an attempt to save money (50 per cent) than as an effort to get people into work (37 per cent).
The Government’s own estimate of the impact of the welfare cuts, also released yesterday, could well reinforce these perceptions. Although some will gain, those who lose out – nearly all of them in families where someone is disabled – lose a lot. Just over three million households will be worse off by an average of £1,720. Those no longer eligible for the personal independence payment benefit lose as much as £4,500. A quarter of a million will be plunged into relative poverty.
The Government hopes that more people with a disability will be able to find work and thus be better off. But, perhaps especially for a Labour government, putting people with disabilities at apparent risk of big cuts in their income could well prove rather difficult to sell to voters.
John Curtice is professor of politics, University of Strathclyde, and senior fellow, National Centre for Social Research and The UK in a Changing Europe
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