Labour has so far struggled to explain its purpose and the need to do so will be all the more pressing if it raises taxes again
Rachel Reeves hopes to use Wednesday’s spending review to tell a long-overdue story about Labour’s purpose in power, that looks beyond fixing the Tories’ fiscal mess.
After the winter fuel U-turn and Labour’s battering at the hands of Reform in last month’s local elections, the chancellor’s team are well aware that voters and backbench MPs need reasons to believe.
And they are irked that Reeves gets little credit for the significant uplift in public spending she is delivering for priorities including the NHS – with debate dominated instead by the coming squeeze on “unprotected” departments.
They do have a point. Day-to-day departmental spending, known as RDEL in Treasury parlance, bobbled around £300bn a year between 2010 and 2019, before shooting up during the Covid pandemic and subsequent energy crisis to hit £423bn in 2023-4.
Last autumn’s budget, let’s not forget, included a stonking £40bn-a-year tax increase, and bumped up RDEL to an estimated £481bn for the current financial year – a significant jump in spending that prompted thinktanks to increase their forecasts for economic growth.
The growth rate of spending at the back end of the parliament will be considerably lower, after this early jolt, and the voracious demands of health and defence will force difficult decisions. But austerity this is not. By the end of the parliament, Labour expects day-to-day departmental spending to be more than £540bn a year.
News that schools spending per pupil will reach its highest ever level in real terms is an example of what the government wants to do with the extra resources it is making available.
The unfortunate truth for Reeves and her colleagues, though, is that two things can be true at the same time: the uplift in spending she has outlined is significant, and will make a real difference, but it is not enough to meet the scale of the challenges the UK faces.
