Once again, the government’s narrative on the economy is shifting.
After a summer warning of tax rises and cuts to deal with the “dire” inheritance allegedly left by the Tories, Rachel Reeves made a conscious “pivot” in her conference speech last month to something more optimistic.
For the first time in Liverpool, there was a hint of more money – a chancellor making clear she understood the importance of investment to get Britain growing once more.
There was further optimism after the government appeared to be deliberately stoking speculation about their fiscal rules – which determine how much debt can be borrowed to finance government spending – and rampant suggestions the definition of debt might change.
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All this means that Cabinet ministers entered their spending review discussions with Treasury chief secretary Darren Jones 10 days ago hoping some sunny uplands would be in view.
But for most, they were not.
‘We’re going to be digging a hole’
“The briefing doesn’t match the reality”, groaned one cabinet minister after discussions this week. “It’s pain this year, and pain next year,” they added glumly.
“We’re simply going to be digging a hole which we end up filling in later in the year.”
Yes, a little more money for big investment projects in time. But very tricky this year and next running government departments day to day.
And now the mood music coming out of the Treasury is once again more gloomy.
On Thursday the Institute for Fiscal Studies warned that Ms Reeves will need to raise taxes in this month’s budget by about £25bn to honour Labour’s pledge not to return Britain to austerity.
This is twice as much as George Osborne in 2010, and could even mean increasing employer national insurance contributions – previously branded by Tories a “jobs tax” in election campaigns to deadly effect, along with a slew of other taxes.
Labour only promised in their manifesto to protect the employee part of National Insurance…
