Labour’s own policies undermine their ‘welfare to work’ agenda
The government has made many mistakes since coming to office, but the Chancellor deserves some credit for not breaking her fiscal rules at the first opportunity. The demands from various groups (and various wings of her own party) for more borrowing or exempting certain measures from the fiscal rules were ruthlessly ignored at the Spring Statement by Rachel Reeves, who likely has a perverse relationship with the framework she set herself just 8 months ago.
While she is undoubtedly frustrated with the OBR’s approach to evaluating her policies, and the constraints that their evaluation places on her, she has made clear the rules are “non-negotiable” and, to her credit, she stuck to them last week – albeit by the riskiest of margins.
Doing so meant slicing £5bn off the welfare budget, something that was presented as a major reform but which in fact appears to be little more than an accounting exercise. Indeed, once the OBR let it be known that they didn’t agree with the maths behind the cost-saving exercise, ministers scrambled around just hours before the Spring Statement to find another few hundred million quid in order to satisfy the watchdog.
Leaving aside the fact that this is no way to run a country (there is a serious argument to be made in favour of abolishing the OBR, or at least dampening its God-like authority) the unedifying spectacle of rushing out an announcement about another trim to the benefits bill – with the bond markets in mind, rather than welfare claimants – confirmed that the reforms are not serious.
Furthermore, ministers are about to discover that any effort they now make to encourage people back into work (or to find a job for the first time) will be undermined by their own policies. The government’s target is to get two million into work, but with only 800,000 current vacancies more than a million roles will have to be created.
Unfortunately, the government’s hike to business taxes and labour costs, to say nothing of the disastrous Employment Rights Act, means that many employers – particularly in the high-headcount sectors of retail and hospitality – are slashing any plans they had to hire more people. Industry surveys continue to show that businesses are planning to either reduce headcount or freeze hiring in the year ahead, meaning that Labour’s “generational” back-to-work agenda is already holed below the water line.