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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Is Britain having a collective nervous breakdown? While almost two-thirds of voters say the country is heading in the wrong direction, the government has gone into a tailspin.
An embattled prime minister and his allies have been rushing around to put out a fire they recklessly lit by briefing against one of their best ministers. And a chancellor who’d already delayed her Budget, supposedly to allow for sober reflection on what she laughably continues to call “pro-growth” policies, has just U-turned at the last minute on her own previous U-turn on income tax.
It is very unusual for a chancellor to make such a big change to a Budget so late, but it’s unprecedented to do so in the full public glare. In 2012 the Conservatives quietly hatched plans to cut the top rate of tax from 50 per cent to 40 per cent.
A nervous David Cameron, then prime minister, forced his chancellor George Osborne to go to only 45 per cent. But those discussions never leaked, despite there being two political parties in coalition. Osborne had been open about his dislike of the 50 per cent rate for a long time. And crucially, there was a clear Plan B.
The current situation could hardly be more different. Sir Keir Starmer, whose lack of interest in last year’s Budget astonished officials at the time, may well have pressured Rachel Reeves to avoid reversing Labour’s manifesto commitment not to raise income tax rates, to try and shore up his own position with the party.
Given the likelihood that this might happen, it is even more bewildering that Reeves chose to float the U-turn, ten days ago, in a speech she didn’t need to make. An improved fiscal forecast from the OBR seems to have given them both a chance to get off the hook.
But it’s amateur. Treasury officials would expect a very good reason to change a major measure at the last moment. A good reason would be the impact on markets. Not a slightly better outlook and political expediency.
The long roar of speculation about the Budget has already damaged market confidence, as the chancellor tries to tiptoe around a black hole she herself has made bigger. Having backed themselves into a corner by ruling out income tax rises before the election, Reeves and Starmer were right to reconsider. The only surprise is their apparent surprise that it wasn’t popular.
With no proper Plan B, the Treasury is now trying to cobble together tax tweaks which are likely to be anti-competitive and distorting. The optics are terrible. Everything is in the mix, the options briefed out by a government which seems frightened of its own shadow. The resulting lobbying frenzy has done nothing to help cool, calculated reflection on what is best for the country. This is student politics, from a group of people who had years to prepare for office but arrived with no plan: only the arrogant assumption that they would just, somehow be better.
This government had a difficult inheritance. But it is now in a crisis which is largely of its own making. Failing to chart a clear course means that its backbenchers have refused to countenance even minor attempts to improve the fiscal position.
The chance to tell a clear story about why winter fuel allowance and sickness benefits needed to be cut, as part of a bigger reset towards fairness and realism, has been squandered. Instead, the message has been simply that Rachel needs to save money — something neither Labour MPs or trade unions will buy. Meanwhile the public has lost patience. Focus groups report the country is “shattered”, with both young and old nostalgic for the past. The frustration is palpable. Having voted for an end to political chaos and infighting, increasing numbers are now expressing a readiness to roll the dice and vote for a new emerging party, like Green or Reform UK.
“Why not give them a go?” is a growing sentiment. “How much worse could they be?” When politics feels like a daily diet of ministers trying to avoid scrutiny, or explaining why they can’t act, it feels less risky to embrace a new party. We voters resent governments which make us worry about things we’d rather not have to think about. We loathe ones which start fighting among themselves rather than getting on with the job.
An idea has taken hold that it’s politically impossible to face down any interest group, in a fracturing world. That’s not true. Yes, the UK has started to look more Mediterranean since Brexit: with rising debt, and prime ministers falling like dominoes. But leaders have been re-elected before on platforms of cuts and reform: Cameron here, Javier Milei in Argentina, Kyriakos Mitsotakis in Greece.
A bit of vision, charisma and competence can go a long way. The current leadership has none of these. “Plan beats no plan” said Tim Geithner, the US Treasury secretary, at the height of the financial crisis. Britain is currently adrift. The only plan is to keep Starmer afloat a bit longer.
It doesn’t have to be this way. Britain’s economic fundamentals are still strong, despite current woes. Our international reputation is strong — exporters say the British brand helps sales. London is flooded with energetic, entrepreneurial Americans fleeing something they think is worse. We can play to these strengths. But we need leaders who govern for the whole nation, not for factions and who can develop a plan and stick to it. Is that really too much to ask?