Standing in what appeared to be a garden centre to announce her latest U-turn on the pensioners’ winter fuel payment, Rachel Reeves looked as if she was wilting a bit.
Never at ease in front of a camera, the chancellor was more stilted than usual and didn’t make much of an attempt to justify the change on any rational grounds.
If this “difficult decision” was the right thing to do last year, when the public finances were under pressure, one might ask: why is it the wrong thing to do this year, when the public finances are still under pressure, albeit for different reasons?
She cannot, for reasons of pride, admit the U-turn is because of the recent electoral punishment-beating administered by an angry public – with the added force of Kemi Badenoch and Nigel Farage both declaring they’d restore the payment in full and immediately.
She certainly cannot concede that this totem of her “iron determination” to do whatever it took to achieve sustainable public finances has had to be tossed away, against her wishes, because the prime minister publicly ordered her to do so and her backbenchers increasingly demanded this hated policy be ditched.
But she knows that everyone knows the truth – and to her credit, she cannot disguise her discomfort. She is in the worst of all worlds: she looks callous (even if she is not) but now she also looks weak, and will get few thanks for giving the winter fuel payment back (mostly). This is not a dream combination of attributes for a senior Labour figure or, for that matter, for a finance minister hoping to dazzle the markets.
In fact, even in executing this U-turn she has somehow managed to botch things, by trying to retain some element of the means-testing she introduced last year, just to save face. So, even now, not all pensioners will receive their £200 or £300 (depending on age).
Or rather, all will receive it initially, but some, not fantastically rich on an income of £35,000 or more, will find it entirely clawed back by HM Revenue and Customs through the self-assessment procedure. It would have been easier all round just to complete the U-turn: instead, Ms Reeves has stopped around the 170-degree mark. It hardly seems worth it.
Even when it was first announced at the end of July last year, means-testing the WFP was an ill-conceived move. Of all the options available to her – and all chancellors, even in the tightest of binds, have choices – she plumped for the one that combined an incredibly modest saving (about £1.5bn) with the maximum political damage.
Some 10 million active and motivated pensioners were ready to head to the nearest polling station at the earliest opportunity to make their displeasure clear.
Too late, Ms Reeves and Liz Kendall pointed out how relatively generous the triple lock on the state pension was. Yet they didn’t attempt to point out what a functioning NHS might do for the quality of life of older people. There was never so much as the faintest hint that an incoming Labour government would scrap something introduced by Gordon Brown and retained by the Conservatives since 2010.
Making the U-turn announcement now, two days ahead of the comprehensive spending review was, presumably, an attempt to manage the news cycle – getting the good-but-embarrassing news out of the way. That might be shrewd, if the review does indeed show how the public services will “live within their means” in the coming years, with welcome extra resources for the NHS, schools and the defence of the realm, restoring Ms Reeves’s prestige.
Yet the authority of the chancellor has been badly compromised by the missteps she’s taken in her first year in office – unforced errors compounded by poor presentation.
The so-called “tractor tax” and an over-reliance on employers’ national insurance contributions have also landed badly. As some old Treasury hands suggest, it feels very much as though her civil servants reached for their favourite policies when the inexperienced chancellor asked about options, and she accepted the recommendations all too readily, in a way her predecessors did not. Maybe the very real “black hole” she inherited panicked her. It looks like it.
At any rate, she is finding it even more difficult to resist her more powerful colleagues in the spending departments when they push for politically expedient solutions.
We need not exaggerate matters, though. Ms Reeves is not like Kwasi Kwarteng being recalled from an IMF summit to be sacked by Liz Truss for delivering (her) mini-Budget in 2022. Nor is this a repeat of a dazed Norman Lamont staggering into Whitehall to announce that sterling was leaving the European ERM in 1992.
Unlike in those episodes, the government’s economic policy has not been destroyed by an adjustment of about £1bn in a social security budget of more than £300bn. But she knows that she is in a weakened position – and, with no following in the party, depends heavily on the confidence of the prime minister to survive.
Sir Keir Starmer knows, as she does, that if he were to move her this early in the life of the government it would only make matters worse in every respect. For now, they’re still in this together.
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