11-06-2025
Rachel Reeves tries to banish George Osborne's ghost
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Rachel Reeves entered office vowing that there would be no return to austerity. Her first Budget imposed the largest rise in taxes since 1993 in order to justify that boast. Spending was increased by £70bn a year, taking traditionally free-market Britain closer to its social democratic neighbours. Reeves' reward? To be defined by a cut.
For almost a year, the Chancellor's decision to withdraw winter fuel payments from most pensioners haunted her. Labour MPs took to calling it the government's 'original sin'; for voters it was proof that an administration that promised 'change' merely represented more of the same. William Gladstone, it is said, occupied the Treasury from 1860 to 1930. The charge Reeves has faced in recent months – as her popularity has plummeted – is that George Osborne still does.
Today's Spending Review was a technocratic necessity, setting departmental budgets for most of the rest of this parliament. But Reeves used it as an attempt at political resurrection, seeking to dispel the impression that she is a 'dessicated calculating machine' (as Aneurin Bevan said of Hugh Gaitskell). Austerity, she declared at the outset of her statement, was 'a destructive choice for our economy' as she sought to banish Osborne's ghost.
This was a classically Labourist speech, filled with bids to redraw the battle lines in her party's favour. Nigel Farage was rebuked for praising Liz Truss's mini-Budget as 'the best Conservative Budget since the 1986', further proof that the government now regards Reform as its main opponent.
Reeves delivered perhaps the most class-conscious and interventionist Spending Reviews since the era of Harold Wilson. Public ownership was praised and industrial strategy hailed. Reeves reaffirmed her doctrine of 'securonomics', declaring that 'where things are made and who makes them matters', and pointedly recalled her comprehensive education, championing 'the 93 per cent' (who attend state schools) over the 'the 7 per cent' (who attend private ones).
Do the tables and charts justify the rhetoric? Reeves can reasonably claim that this is no return to austerity. Total departmental spending will rise by 2.3 per cent in real terms over the three-year period (something the Chancellor contrasted with the 2.9 per cent cut imposed by Osborne in 2010).
The winners include Health and Social Care, which secured a 2.8 per cent rise – a reflection of the political importance No 10 attaches to reducing waiting lists – Defence (3.6 per cent) and Ed Miliband. The Energy and Net Zero Secretary is routinely predicted to be on the brink of expulsion from Keir Starmer's cabinet but his department enjoyed one of the most generous settlements, with a 16 per cent increase in spending. Here is a reminder that the government's green agenda is not a Miliband solo project but one that, as Starmer often puts it, is in his administration's 'DNA'.
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Yet in order that some may win, others must lose. Yvette Cooper's Home Office, which was the last department to settle with Reeves, suffers a 1.7 per cent real-terms cut in its day-to-day funding (partly attributable to the pledge to end the use of asylum hotels by 2029), Angela Rayner's Ministry of Housing, Communities and Local Government (-1.4 per cent), Transport (-5 per cent), the Foreign Office (-6.9 per cent) and Environment, Food and Rural Affairs (-2.7 per cent) also face reductions.
Few in Labour believe that such cuts will be deliverable – in either policy or political terms. Though Reeves today sought to make Osborne history, a battered public realm will bear his mark for far longer (by the end of the period, real-terms spending will only just have returned to its pre-2010 level).
Governments traditionally boost spending in advance of an election in the hope of a political dividend. In a world in which, as one senior Labour figure put it to me, 'the global headwinds are appalling', most expect tax rises or fiscal rule changes will prove essential. Reeves can only hope that she has bought herself the political breathing space she so badly needs.
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