Working people farce shows Labour better sticking to we’re all in it together

Reeves should use the Budget to level with the public and articulate that everyone counts in the common endeavour to pull the nation out of its current despond.

Rachel Reeves via Treasury

Sir Keir Starmer and his ministers are struggling to define who “the working people” he wants to shield from tax rises really are. Wiser heads, such as the Chancellor of the Duchy of Lancaster, Pat McFadden, are simply refusing to be drawn into that game, committing merely to deliver what the manifesto says, without accompanying commentary. 

McFadden is a veteran of Tony Blair’s new Labour government and must know that the “big tent” and “we are all in this together” may be a better way to bring the government and the governed together rather than playing divisive class politics. 

Starmer spelt it out in his party manifesto, Change, this summer: “Labour will not increase taxes on working people, which is why we will not increase national insurance, the basic, higher, or additional rates of income tax, or VAT”. That seemed clear enough at the time. It turns out that in his lawyerly way, Sir Keir left plenty of room for verbal gymnastics over what was really pledged to whom.

In the seventeen weeks since its election, the popularity of the new majority government and the Prime Minister have sunk further from the already historically low levels with which they came to power. Rachel Reeves’s Budget this week may be the last chance to pull out of this doom loop of despair. She certainly needs to articulate that everyone counts in the common endeavour to pull the nation out of its current despond. 

The government may shy away from telling us who these “working people” are. Its actions in the four months in office have revealed who they are not. The undeserving with “broad shoulders” have been singled out to carry the burden of paying for national recovery.

Pensioners, parents using private schools and non-doms head the list. Most of these are found in the better-off half of the electorate, though millions of pensioners above the benefit cap are still relatively poor. Millions of others in receipt of welfare have been put on warning to expect a squeeze as this government makes work pay. A £1 increase in the cap on bus fares includes bus travellers on the list of those paying more. We shall see if motorists buying fuel are next.

Given the country’s straightened circumstances, few would disagree that most of these groups should contribute more than their share to a programme of recovery. The government’s mistake has been to single them out and imply that “working people” should be exempt from making a contribution. 

Interventions by ministers have only added to the impression that “working people” is really a euphemism for “working class”. Quick decisions to fund fully no-strings pay settlements for workers in the public sector and to increase union rights have also hinted where this government’s priorities lie.

Last weekend, the robotic education secretary Bridget Phillipson identified those who go out to work and get a pay slip in this romanticised category. She excluded small business owners, who may be taking out well below the national average wage. The prime minister went further, ruling out people with “assets” that enable them to “write a cheque to get out of difficulties”. So that’s it as well for landlords, investors, and freelancers, who may find themselves paying employee and employer National Insurance. The concerns of students and other young adults don’t appear to feature much in the government’s thinking either.

Rolling the pitch like a Pakistan Test groundsman, Starmer stuck to his rhetoric in his pre-speech on Monday, promising “a budget for working people, from a government for working people”. “It is working people who pay the price when their government fails to deliver economic stability,” he argued. “They’ve had enough of slow growth, stagnant living standards and crumbling public services.” No, Sir Keir, actually its everyone who pays the price, young and old, rich and poor, with a steady job or not. 

The government’s moralising rhetoric about who should pay and who should not is a long way from Peter Mandelson’s “We are intensely relaxed about people getting filthy rich as long as they pay their taxes.” It is alienating potential investors, big and small, for all the government’s grandiose investment summits. Non Doms and other millionaire emplayers are already leaving the country. 

At the other end of the income scale, the “working people” formula seems designed to cling onto the red wall voters which Labour won back at the last election. Like the rest of the electorate they want better public services but, according to polls, they are prepared to pay more tax for them. They are also aspirational and less resentful of the wealthy than the average Starmerite. I doubt they give a toss that Starmer’s father was a toolmaker or that most of the Cabinet went to comprehensive schools, as we have been told ad infinitum. 

The irony is that the government is in reality planning tax increases for all, including working people, but does not want to admit it has been forced to U-turn in spirit. The insulting calculation appears to be that “working people” will not notice that they are paying more if it does not show up in their pay slips immediately after the budget. Falling inflation and rising real wages may help the confidence trick but everyone will still end up contributing to 35 to 40 billion pounds worth of tax increases. A continued freeze on income tax thresholds is a straight forward clawback. Employers NICs are a tax on jobs and will impact on employment, wage levels and costs to the consumer. 

Those already singled out, without explanation, to pay more or sacrifice subsidies are feeling it now. Sir Keir, our Roundhead Chief of Men, believes that is only right. Now he is telling them to buy into the government’s plans in the common interest, while still claiming that he is protecting “working people” from contributing. In his speech on Monday, the prime minister suddenly switched to the collective pronoun “We”. “We must embrace the harsh light of fiscal reality… so we can come behind a credible, long-term plan”, he appealed.  

Economic strategy is only one of the areas where this government has seemed incoherent, partisan and piecemeal until now. There is a credible case to be made for its plans to steady the economy by increasing the tax to cover fiscal “black holes” and spending on infrastructure and public services to incentivise growth. 

In her budget, the first female Chancellor has the opportunity to reset the government, to level with the public and to make a persuasive statement of what it is trying to achieve. As Professor Jonathan Portes says, “there will never be a better opportunity to articulate not just a budget but an agenda for meaningful change.”

Rachel Reeves will not pull it off if she sticks to Starmer Government mark 1, playing favourites, blaming the Tories, and mixing sophistry with self-righteousness. As Tony Blair used to say, it’s about the future not the past.