John Healey is repeating Rachel Reeves's mistakes
Chancellor John Healey seems content with the script handed to him by his predecessor, Rachel Reeves. The results will be just as bad, says Matthew Lynn
With a new prime minister and a blank sheet of paper, John Healey could have started his chancellorship with a burst of announcements. After all, Andy Burnham appears determined to try to do things differently and, even if most of the policies announced so far are very small-scale, at least he is trying. His chancellor, by contrast, has been very quiet. He popped up briefly to replay a few familiar complaints about price gouging by the supermarkets, even though the major grocery chains operate on some of the slimmest margins in the world, and there have been a few leaks about more borrowing. Apart from that, No. 11 has remained silent.
He may, of course, be storing up the major announcements for his first Budget, now scheduled for the end of October. But the really significant chancellors of the last 50 years all made major policy decisions within their first few weeks in office. Gordon Brown announced the independence of the Bank of England. Nigel Lawson slashed the top rate of tax from 60% to 40%. George Osborne created the Office for Budget Responsibility and set out plans for controlling the growth of public spending. You might agree or disagree with any of those decisions, but there is no question they were significant and had a major impact on the economy. Each of these chancellors seized the day to make big reforms, aware there would never be a better time for a change of direction.
It would not have been hard for John Healey to hit the ground running. He could immediately have licensed new fields in the North Sea, as well as reduced the windfall tax on new developments. That would have made it clear from day one that the new government was more interested in energy security than in virtue signalling on climate change. He could have suspended the rise in employers' national insurance for six months to give companies a chance to start hiring again. To help with the cost of living, he could have lifted a range of tariffs that are still left in place from when we were part of the EU. He could have suspended some of the green levies that, when added to the highest industrial energy prices in the developed world, have crushed manufacturing. He could have cancelled pointless taxes such as the packaging levy that have added to the costs of retailers.
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He could have demonstrated a commitment to curbing Britain's out-of-control welfare spending, perhaps by replacing the “triple lock” for pensioners with a slightly more affordable “double lock”. The list goes on.
John Healey appears to have pressed the “repeat” button
Instead, he is sticking to the script written by Rachel Reeves. There are lots of attempts to shift the blame onto business for persistent inflation, ignoring the impact that the constant criticism is likely to have on confidence. There are repeated attempts to manipulate the figures to allow the government to get away with borrowing yet more. Most of all, there is a complacent assumption that the economy will recover so long as the government spends more, despite all the evidence to the contrary. Reeves took months to announce anything of significance and even then it was just a huge tax raid. John Healey appears simply to have pressed the “repeat” button.
Meanwhile, genuine reforms to the supply side of the economy, such as freeing up planning rules to make it easier to build things, scrapping pointless regulations such as the GDPR on data protection inherited from the EU, and creating incentives for entrepreneurs and firms to start investing again, have been sidelined. They might come in the Budget, but I don't think anyone is holding their breath. There might only be two years left before a general election, and if Labour doesn't manage to get the economy growing before then, accelerating wage growth and getting unemployment down, it will surely lose. It is becoming painfully clear that the centre left doesn't have any ideas apart from taxing and borrowing more to try and keep the public-spending juggernaut on the road for a few more years. John Healey seems content with a re-run of the Reeves years – the results will be just as bad.
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