What is Labour’s governing philosophy? That was the question posed at a dinner I had with some MPs and former staff during the party’s annual conference in Liverpool last week. Is Keir Starmer influenced by the communitarian mix of left-wing economics and socially conservative values, or “Blue Labour”, or is he at the center of his campaign to become Labor Party leader? Is it driven by the Fabian democratic socialism that existed?
Those interested in the direction a particular government takes always take a deep look at the beliefs that motivate a prime minister. But I’m not sure how important it is in this case. Because there is a third governing philosophy that dominates the Labor Party and renders almost everything else irrelevant. Fiscal conservatism.
By adopting her Conservative predecessor’s fiscal rules (that the national debt should be expected to fall as a share of GDP in five years’ time), Rachel Reeves will achieve growth through tax cuts and the private sector alone. It essentially expressed the conservative macroeconomic worldview that it can be done. Rather than leveraging private investment with public investment in key infrastructure, a lack of private investment has stagnated the UK economy for decades. That may have been a good strategy to win elections, but it’s a terrible growth strategy. So it was very welcome when she hinted last week that she would relax the definition of debt in those rules to increase the scope for borrowing for investment. That nugget alone was far more important than anything Starmer said in his speech.
But there is a second fiscal rule that Mr. Reeves shows no signs of escaping. It means that total daily spending on things like the NHS, education and police must not exceed annual tax revenues. He told a fringe meeting last week that the rules would require “tough decisions” in October’s budget. Given that Labor has also ruled out most tax increases, this could mean removing the VAT exemption on private school tuition fees to pay for 6,500 extra teachers until the economy kicks in. This means there will be no significant spending increases, apart from a few specified proposals such as paying We will once again experience healthy growth and increase tax revenues.
After years of public spending cuts, reform is almost impossible without additional resources
There is a chicken and egg dilemma here. What if, for example, meaningful growth cannot be achieved without spending more on NHS services to help long-term ill people return to work, or on adult education to improve skill levels? And what if this rule This is what prevents ministers from understanding what exactly they want to achieve in their respective areas. Because after years of cuts in public spending, it is almost impossible to reform without additional resources.
More importantly, the rules raise the question of government definition of what Labor intends to do about rising child poverty rates. Almost one in three children in the UK currently lives in relative poverty and one in six households are affected by food insecurity. These frightening figures are the result of a toxic combination of rising costs of living, including housing, and the cruel effects of Tory changes to taxes and benefits. Between 2010 and 2024, the poorest tenth of households with children lost an average of £6,000 a year. This was the result of reforms such as the two-child benefit limit and the total benefit cap, while most households in the top half of the distribution were net increasers.
Successive Conservative prime ministers effectively overturned the previous Labor government’s decision to increase financial support for low-income parents. And child poverty is predicted to rise further over the next five years, with more households likely to fall under the two-child allowance cap in the future. Child poverty is deepening, with an additional 400,000 children predicted to be in relative poverty by 2029. Poverty rate is highest since the 1990s. Growing up in poverty doesn’t just undermine childhood. It affects the health, education, and employment outcomes of those children for the rest of their lives.
Listening to ministers in Liverpool last week, I have no doubt that they consider tackling child poverty to be a moral priority. Rosie Duffield MP cited the decision to maintain the two-child cap in her resignation letter yesterday. The problem is that, apart from free school breakfast clubs, Labor has no policy to deliver this in the medium term. The government has set up a task force to develop a child poverty strategy, which is good. But writing strategies is no substitute for the only way to immediately reduce child poverty: putting more cash into the hands of poor parents or directly reducing their spending.
The biggest test of this government’s character will not be the decision to impose a means test on pensioners’ winter fuel costs, or whether ministers will continue to treat entertainment with potential conflicts of interest as harshly as they have in the past. The question is whether the Cabinet will look at the fact that hundreds more children are moving above the poverty line every week and decide to do something meaningful about it.
The Resolution Foundation estimates that the package of measures, including removing the two-child limit and removing caps on benefits, will cost around £3bn in the first year and increase over time, but will at once cost 600,000 people. It is estimated that children can be lifted out of poverty. You don’t need a child poverty strategy to understand that.
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Mr. Reeves said he could raise that money through specific increases in wealth taxes, such as capital gains taxes, or raise spending significantly across the public realm, but not to lift billions of children out of poverty. Either they realize that they have to borrow billions of dollars. Of course. This is true on a moral level as well, but the long-term cost to the exchequer of child poverty due to poor employment and health outcomes means that the upfront investment in wrapping children in a blanket of better economic security from the start This is also because it trivializes the
In any case, she has something important to announce about child poverty next month. Because if a Labor government does not see its core mission as improving the lives of some of the poorest children, in good times and bad, then what is it for? ?
Sonia Soda is a columnist for the Observer.
