A question for Labour: do you have any real change? | William Keegan

The election campaign mantra of “change, change, change” reminded me of those people down on their luck who approach you in the street and ask “got any change, guv?”

Until this month’s welcome result in the polling booths, the Labour party had certainly been down on its luck. From the moment in 2010 when the new chancellor, George Osborne, capitalised on departing Labour chief secretary Liam Byrne’s joke that “ there’s no money left ”, Labour was fighting an uphill battle.

It was a joke. There was a tradition in the Treasury that such greetings were left for the succeeding government, but that it was “not cricket” for political capital to be made out of them. Not, that is, until the advent of Chancellor Osborne and the coalition chief secretary David Laws, who had found his predecessor’s joke in his in-tray.

In 1964, the departing Tory chancellor, Reginald Maudling, quipped to the incoming chancellor, James Callaghan, “sorry to leave it in such a mess, old cock”, but Callaghan did not make a meal out of this and the story only emerged years later.

In 2010, there was plenty of money available out there, although the repercussions of the 2008 financial crisis did not make things easy. But, in a thoroughly misleading way, Osborne blamed Labour’s putative overspending for the crisis, whereas – as the senior official at the Treasury, Nicholas (now Lord) Macpherson, pointed out – “it was a banking crisis, pure and simple .”

Osborne used the fantasy that there was no money left to introduce austerity, whose damaging impact was one of the factors that contributed to the protest vote in the 2016 Brexit referendum – and, eight years later, to the resounding defeat of the party that had foolishly called it.

But back to the all-change mantra. Much as I try to manifest goodwill towards Starmer and his iron chancellor, Rachel Reeves, when I look at their rigid adherence to the previous government’s fiscal rules and public spending plans, I do not see much sign of change, change, change.

Frankly, I think a Labour government that has a huge majority and is in an enviably powerful position is making a huge mistake in not capitalising on its freedom and the manifest goodwill that has greeted it from the majority of voters, as well as business and finance.

Kenneth Clarke famously said that, had the Conservatives been re-elected in 1997, he would certainly not have stuck to his own spending plans

Reeves spends as much time reminding us that she worked at the Bank of England as Starmer does telling us his father was a toolmaker. Someone else who worked at the Bank is Andy Haldane, the former chief economist there and now chief executive of the Royal Society of Arts. Haldane takes a more refreshing view than Reeves of the so-called fiscal restraints. In an article in the Financial Times in May, he said of the fiscal rules: “By constraining investment and stunting growth, these are self-defeating … they need to be replaced with rules that prioritise growth and seek to maximise national net worth, not minimise gross debt.”

Of course, the other election mantra that accompanied change, change, change was growth, growth, growth. But without a more positive fiscal policy, and a boost to trade from rejoining the single market, it is not obvious that there will be a boost to growth. Starmer and Reeves keep calling for such a boost. But I am reminded of that great exchange in Henry IV, Part One : Glendower: “I can call spirits from the vasty deep.” Hotspur: “Why, so can I, and so can any man; But will they come when you do call for them?”

Another, connected, sphere in which I worry that the new government is being timid is in the lame way it has accepted the Sunak-Hunt spending plans. This is reminiscent of the way Gordon Brown accepted Conservative chancellor Kenneth Clarke’s spending plans in 1997. Clarke laughed at this and famously said that, had the Conservatives been re-elected, he would certainly not have stuck to his own plans.

One of our new crop of Labour ministers’ distinguished predecessors was Harold Lever, who served as financial brain to the Wilson/Callaghan governments of 1974-79. He had a favourite phrase when expressing his views on the approach to economic policy of his colleagues: they were, he declared, “frolicking in the margins”.

Both with regard to fiscal rules and our relations with the EU, it seems to me the new government is indeed frolicking in the margins. It is certainly good news that Starmer is trying to “reset” our relationship with our former EU partners . But, while welcome, the various ways in which he is seeking to mitigate the economic harm of Brexit are relatively minor by comparison with the continuing, and mounting, damage being wrought by our exclusion from the EU.

In the words of Mike Galsworthy, chair of European Movement UK, the latest IMF forecasts confirm that leaving the EU “has drained the life out of the British economy”.