In short
The News Agents Podcast Episode Summary
Episode Title
Does Labour need to own its move to the Left?
Overview In this episode of *The News Agents*, hosts Emily Maitlis, Jon Sopel, and Lewis Goodall delve into Labour's recent budget announcements and the implications of its shift towards left-wing policies under Keir Starmer’s leadership. The discussion highlights the reactions to the budget, critiques of Labour’s current economic strategies, and the necessity for the party to address its manifesto promises more transparently.
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Key Themes
Labour's Budget Announcement
- Budget Content: Keir Starmer’s government is prioritizing significant spending on public services such as NHS funding and raising the minimum wage while implementing tax-raising measures.
- Political Strategy: Starmer and Rachel Reeves are working to defend these budget measures against accusations of breaking manifesto promises, specifically concerning tax increases on working people.
Labour's Shift to the Left
- Fundamental Change: The recent budget indicates a fundamental shift in Labour's approach, moving towards greater state involvement and taxation.
- Debate on Ownership: There is an ongoing internal debate within Labour about whether to fully embrace this leftward shift instead of downplaying it.
Reaction and Criticism
- Tetchiness Among Leaders: The hosts observe a noticeable irritation among Labour leaders when questioned about tax increases and their fidelity to prior commitments.
- Press Reactions: The budget received largely negative press coverage, particularly regarding the lack of growth and the implications for working-class tax burdens.
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Exclusive Interview with Lucy Powell
- Labour's Deputy Leader: Lucy Powell emphasizes the importance of the budget being a step towards a longer-term economic program, highlighting measures that aim to lift children out of poverty and promote fairness in the tax system.
- Defending Tax Policies: She acknowledges that taxes on working people are increasing but maintains that it is part of a strategy to invest in public services and tackle deep-rooted economic issues.
Key Arguments from Lucy Powell
- Investment in Child Poverty: Powell argues that lifting the two-child benefit cap is a crucial step towards reducing child poverty.
- Manifesto Commitments vs. Reality: She defends the Labour government’s actions as being aligned with their manifesto while also facing the harsh realities of the economic situation inherited from previous administrations.
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In-Depth Analysis
Economic Implications
- Fiscal Drag: The hosts discuss the concept of fiscal drag, where inflation and tax thresholds lead to increased tax burdens without formal rate increases, complicating public understanding and perception.
- Growth Challenges: There is a consensus that Labour's budget lacks significant measures to drive economic growth, positioning Labour as a more traditional social democratic party but facing criticism for not adequately addressing growth.
Internal Party Dynamics
- Unity and Dissent: Powell reassures that Labour MPs are united behind the budget, despite previous internal dissatisfaction that led to her election as deputy leader.
- Navigating Future Challenges: The conversation suggests that while Labour is currently positioned to support the government's agenda, underlying tensions and potential challenges remain as local elections approach.
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Conclusion The episode underscores a pivotal moment for Labour as it navigates its identity and policies amidst a challenging economic landscape. The discussion highlights the importance of transparency in communication with the public and the need for Labour to embrace its leftward shift while maintaining accountability to its electoral commitments.
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Listening Information
- Hosts: Emily Maitlis, Jon Sopel, Lewis Goodall
- Availability: Episodes are released every weekday afternoon and can be accessed through various platforms including Alexa via Global Player.
For more information, visit [The News Agents website](https://www.thenewsagents.co.uk/).
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:02Keir Starmer:This is a Global Player original podcast. I absolutely do believe that we've got to lift children out of poverty. We've had a two-child cap in place for the best part of 10 years. The net result of that is hundreds of thousands of children have been living in poverty. That has a massive impact on their health. Go to any hospital and ask them what is the link between poverty and health. They say it's a direct link and those children will not have the opportunity to go as far as their talents will. I'm not going to apologise for lifting half a million children out of poverty. That is the Prime Minister Keir Starmer, sounding irritated, perhaps even tetchy, on questions around whether his government's budget delivered yesterday has broken Labour's manifesto promises.
0:44Keir Starmer:Make no mistake, this budget shows a Labour government that wants to spend big and tax big. But if that's where they are, why don't they own it? Why don't they lean into it and stop pretending they're something different? Welcome to the News Agents.
1:05Keir Starmer:The News Agents. It's John. It's Lewis. And the thing that has struck me in the sort of 12, 24 hours since the budget is the tetchiness of Starmer, of Rachel Reeves, of Torsten Bell, who we had on the podcast yesterday afternoon when we were trying to put... So serious questions about... He went down well with all of you. Yeah. Isn't this a breach of trust? Haven't you... Can't you just admit that you have raised taxes and that you have increased spending massively and that this is not what you said you would do in the manifesto, which we were all consuming less than 18 months ago? And it's really striking how they must have known that those would be the questions that would arise out of this budget when Rachel Reeves a year ago said it was one and done and here we are and she's come back for more, a lot, lot more.
2:01Keir Starmer:Yeah, I mean, she's admitted today, Rachel Reeves, the Chancellor, that working people will indeed need to pay more after the, as we were talking about yesterday, the freeze, a substantial freeze on income tax threshold. But she said that she had kept that to an absolute minimum through her other measures. And look, this is a budget where the pieces are still settling. It is notable there is pretty negative, almost universally negative reaction across the different bits of the press, more or less. A lot from the economics sort of commentariat, also pretty scathing, particularly on this question of a lack of growth, which is, again, something we were talking about yesterday, which is basically what Reeves is doing is sort of moving the pieces around on the board rather than growing the size of the board or changing the game.
2:42Keir Starmer:So that's all pretty bad. The one area or the one group of people who have been considerably more sanguine, apart from the markets, in fairness, have been Labour MPs who have reacted pretty positively to it. There haven't been noises off. There have been very few critics sort of articulating any sort of deep criticism insofar as there has been. It's just some of the sort of soft left, more left-wing MPs saying, great start, but we'd like to see this go a lot further. And I think what is absolutely true to say is that, you know, if you really strip out all of the noise of the first 18 months of this Labour government and the two budgets, the two big fiscal events that we've seen, What we actually see is a government which in many ways is classic bread and butter social democracy, a classic centre left to left wing government, which is using the means of the state, the mechanisms of the state to be highly distributive.
3:33Keir Starmer:Yes, it's not doing the things that its most left-wing critics would like, which is to borrow even more. It's borrowing quite a lot, but borrow even more and spend even more. But if you compare it, we're still basically right, living in a time of scarcity, in the sense that the British state has less and less money each year than it might have done if growth had kept up as it did before 2008. And the demands upon the state are getting bigger and bigger every year because of an aging population and other things. You've had two chancellors in particular who've had two different approaches to how to meet those challenges.
4:06Keir Starmer:One was George Osborne, who basically did most of it through spending cuts on an 80-20 ratio. Rachel Reeves is doing the exact opposite. She's not cutting spending. She is keeping spending going. It's not rising as highly as it might have done in the past, but she's still spending a lot of money, especially on welfare and in certain government departments like health. She is financing it through tax increases at almost exactly the same ratio, inversely, to George Osborne. That is a big, different economic and political story than that which we saw under the Tory government. Of course, you're absolutely right.
4:35Keir Starmer:But that is not the argument that Labour made to the British people during the general election. No, they didn't make any argument. Well, they said that we were going to be the fastest growing economy in the G7. We were going to be, you know, the kind of our number one mission was economic growth. everything was going to be done to unleash those forces so that Britain became, you know, productivity increased and economic growth would rise as a result of it. And what have we seen in this budget? We've seen next to nothing that will generate economic growth. And we've got that quote that, you know, we mentioned yesterday from the OBR, which says that we've assessed that none of the policy measures in this budget have a sufficiently material impact to justify adjusting our post measures potential output forecast.
5:22Keir Starmer:In other words, there's nothing here that is going to generate economic growth. That is not the arguments that Labour made during the general election. And so I'm not surprised that a lot of the questions have been. But haven't you lied to us? Haven't you told us you would do one thing and you're doing something quite different? And that is always rightly so an uncomfortable place for politicians, because if you want to get disenchantment, if you want to get disillusionment if you want to increase cynicism then you promise one thing and deliver something else well i think the question is there's two questions one is the centerpiece of the budget as we were saying yesterday is around income tax thresholds and the chancellor has chosen to freeze those rather than increase income taxes because the treasury thinks that people don't notice it as much there's been a huge amount of coverage to it over the last 24 hours i suspect there will be continue to be considerably more coverage over of the coming days.
6:20Keir Starmer:Most people don't know what fiscal drag is. Sounds fun, but it's not. Believe me. I've tried it. And it is something that is... It's a minor, as people. It is something that is potentially now starting to enter the political consciousness in a more significant way just because, as we were saying yesterday, occasionally you've had chancellors who sort of mess around with those thresholds a little bit or freeze them, but this is going to go on for such a long time, basically for a decade, started on the Tories, for a decade, and such being, such a profound restructuring of our tax system that it is possible it starts to increase in salience.
6:50Keir Starmer:And so the question is whether the public do start to notice it and or, the second question, if they do notice it, does Rachel Reeves and Keir Starmer or do Rachel Reeves and Keir Starmer have the communication skill to be able to explain why it is they've done what they've done? I mean, I would say probably gently in the last 24 hours or anything to go by, probably if actually the last 16 months or anything to go by, the answer might well be no. Yeah, and that is, you know, look, it's fine. What we are seeing now from this second budget, very clearly is that this is an old Labour budget. This is the Labour Party of old, of high taxation, high public spending, growth in welfare bills and all the rest of it, with no particular measures that you can see on the horizon that are going to lead to dramatic reform of that, and an increased tax take to pay for that.
7:42Keir Starmer:Now, that is going back a bit. I mean, that was as far away from, you know, the blair mantra and the blair kind of economics now of course the world has changed since then the 2008 financial crash has changed an awful lot of the calculus and the kind of the way we view the global economy but i do think that this is puts labor in a position now where it is very much a party of old you know people in the 70s and early 80s would recognize although in fairness the interest that so many of the current crop of Labour MPs have in child poverty, indeed, Rachel Reeves herself, is born from the legacy of the Blair government.
8:19I mean, the Blair government, you know, was partly because of Gordon Brown's influence,
8:23Keir Starmer:who have been very influential on this budget as well, and this question of the welfare of the benefit cap. You know, one of the key metrics that it talked about all the time was child poverty, and indeed, it had a very successful record on child poverty. So, in a way, I think, John, you're right that in its hallmarks, in the way it is approaching politics, It is in lots of ways a more sort of classic iteration of Labour, sort of pre-New Labour. But there are sort of New Labour kind of hangovers. One of the reasons they're also interested in child poverty is partly because it casts such a long shadow from the New Labour years.
8:52Keir Starmer:Yeah. And look, you know, you can't go back and rewind the clock and just say that the New Labour policies kind of did everything. They didn't do everything. Although, as you say, there were all sorts of kind of things like Sure Start and whatever else that were kind of made a significant contribution. towards the alleviation of child poverty. What I'm struck by is you said it about surely your economic policy, if you want to generate growth, is you've got to grow the size of the cake, that you've got to make the economy bigger. And in that sense, I think there have been a variety of measures that have been introduced in these last two budgets, which I can't imagine a Blair government ever introducing that would have had such an effect on business, you know, an employee national insurance contribution.
9:40Keir Starmer:And although there's been, I think, a bit of a sigh of relief from some sections in business that, you know, this budget could have been a lot worse. It's that kind of judgment that not much is happening that is going to grow the economy significantly. Well, what I'd say is I think the danger for Labour here is that they're caught betwixt and between two things, which is that it is clear, as I say, the big story of these two budgets is in many respects Rachel Reeves and Keir Starmer nudging us towards a more continental style European social democracy for economy, right, where the state is bigger and bigger, more money is spent on tax, more money is taken from the economy in taxation.
10:17Keir Starmer:Working people on middling incomes do pay more in tax, and that is spent on public services and welfare. It's nudging us closer towards the European direction and away from the American direction. And we've always sat somewhere in between. That's fine. I mean, that might be what you want to do and lots of people will support that. But you might as well own it. Exactly. You might as well own it and say and find very clear arguments to say that this isn't the late 90s anymore. It's not the 1980s anymore. We're doing this because the demands on the state have got bigger and bigger and bigger. We live in an uncertain, insecure world and we need the state basically to look after us.
10:51Keir Starmer:Now, again, you can I'm not saying that's right or wrong. I'm just saying that is basically the direction they're going in and they might as well own it. and in a way their problems for them up to now in a sense have not been owning it from the beginning because that was always their sort of instinct and they didn't level with people enough about it so you know you're going into the election saying that they're not going to increase taxes on working people let's be clear they are increasing taxes on working people and freeze in income tax threshold is tantamount to an increase in income tax in all but name and indeed you know i think probably and we saw them lead up to this in our heart of hearts the chancellor would have preferred it would have been cleaner simpler and fairer for all sorts of slightly complicated reasons just to increase income tax.
11:29Keir Starmer:I think it would have been politically disastrous because of the manifesto commitment, but she's clearly backed away for that reason. But there's a resolution foundation who, you know, say very close to Labour, have said, you know, just in the last 24 hours, that sticking to that manifesto pledge and freezing income tax thresholds rather than just raising income taxes actually hurt lower middle income earners most. And they're saying that in effect, they have broken the pledge regardless because the tax burden on working people has increased by 26 billion in this budget alone. So, you know, it is that I think they're caught in a bit of a vice where their instincts and what they're trying to do and what they want to do, what their backbenchers are comfortable doing, is nudging us in that more classic social democratic direction.
12:12Keir Starmer:Torsten Bell, when he sat down yesterday before we started recording, we were having a bit of a joke about taxes going up, and he said, well, you don't want proper bread and butter social democracy. You know, that's the direction of travel. That's how they're thinking, right? But they're not being explicit enough with the public and explaining the reasons why. And I just think, look, three times yes, own it. If this is what you're doing, own it and make the argument for it. But what I think lands really, really badly with the public, and I was struck by it when we were interviewing Torsten Bell yesterday, and I think I said to him, for God's sake, just have some humility and tell us truthfully that, yes, you've raised taxes and this is why you've done it, rather than trying to pretend that everything is not what we can clearly see.
12:55Keir Starmer:and I think that is where politics gets itself such a bad rep when everyone can see with their own eyes what it's going to do to their own household income and what it's going to do to their savings or whatever it happens to be and yet Labour is trying to pretend that it's absolutely not that it's all fine and that these were necessary measures you know look you've taken the measures you promised in the kind of manifesto that you'd need eight billion in tax rises so far in the 16 months of this government you're going for 66 billion in tax rises that is quite a big difference now you've got to have a story that accompanies that and at the moment they're saying there's nothing to see here there's plenty to see here just tell us what it is or that they're having to do it because of unforeseen circumstances and honestly that just doesn't wash it doesn't wash because everything they cite happened they knew about yes there is the obr downgrade and productivity hard thing to talk about very hard thing as soon as you mentioned it you know people have already turned off, even though there is some truth to it.
13:52Keir Starmer:But the fact of the matter is, is that, you know, the things they cite, whether it was Brexit, whether it was COVID, whether it was the Ukraine war, whatever it is, that was all known about in July 2024. The Chancellor knew about that when she made her manifesto pledges. By all accounts, she said, in terms of boxing herself in on those income tax pledges and so on, she said, well, that would be a nice problem to have. Well, it's turned out not to be a nice problem to have. It's been turned out to be a vice around her. And the argument to say that things are a bit worse and all those things that we knew about isn't very credible, isn't very convincing because you knew how bad they were roughly.
14:25Keir Starmer:Yes, the OBR might have come back and said they were even worse, but you knew about them. So why did you not take account of them when you made that pledge in the first place? And we had Paul Johnson, who was then running the Institute for Fiscal Studies, the kind of, you know, the economists and analysts who go through all these numbers, who kept on saying during the election campaign, this is all bullshit. You're going to have to raise taxes significantly. There is a black hole. You've got to be honest with the British people and Labour, for understandable reasons in campaigning terms, wanted to absolutely minimise what they would have to do.
14:59Keir Starmer:And now they're in government. You know, everything that Paul Johnson said has turned out to be correct, that they would need to raise taxes significantly. And that is what happened yesterday. Right. When we come back, we're going to be talking to the deputy leader of the Labour Party, Lucy Powell, who, as we've talked about on the show before, has this intriguing position where she's sort of half in, half out of the tent. Both Keir Starmer's deputy, but also elected very much only a few weeks ago as a riposte to Keir Starmer's leadership by the party members themselves. We're going to ask her what she made of yesterday's budget.
15:33Keir Starmer:Stay with us.
15:37Keir Starmer:news you can trust and the conversations that matter with award-winning journalists at the
15:43Rachel Reeves:heart of the stories from the uk and around the world breaking news here in edinburgh i'm simon my american week is next reporting from the heart of card discover how today's story affects your life listen on our free global player app or the new lbc app lbc leading britain's conversation
16:07Keir Starmer:The News Agents. Well, we're joined now by Lucy Powell, the deputy leader, still a relatively freshly minted leader, deputy leader of the Labour Party. Lucy Powell, thanks so much for joining us again on The News Agents. Very simple question, really. What did you think of the budget? Was it everything you hoped it might be?
16:21Rachel Reeves:Well, look, it was a good, strong Labour budget from a Labour government. And I think, look, we can't do everything in one budget. So it's part of a longer term programme. But I thought, you know, what Rachel set out was really positive, lifting the two child benefit cap in particular, but also setting out a fairer tax system and how we're going to deliver the kind of change that the country has voted for. and I thought there was a really clear narrative about that and I think it's important now that we all come together as one Labour team and really take head on some of the arguments that she's begun to open up and make the case over the coming weeks as to why the decisions that we've taken are the right ones in the long-term interest of the country.
17:07Keir Starmer:You and others have argued recently about the potential merits of a wealth tax. There was no wealth tax in there. Did that disappoint you? Is that something you'd like to see in the future?
17:15Rachel Reeves:I don't know that I particularly specified that.
17:18Keir Starmer:I've spoken to you about it during the Zepty Leadership Contest. You said it thought it was a good idea.
17:22Rachel Reeves:There were definitely some big measures in this budget around a fairer tax system, equalising taxes on income earned from assets, for example, rather than just on work, the mansion tax, if you want to call it as that. That builds on further measures that Rachel had set out in a previous budget on the VAT on private schools, private jets, many other changes. So there definitely is part of a wider programme here of making a fairer tax system so that it's not just the many, if you like, that pay for things. We do have to tackle inequalities right across the tax system.
18:04Keir Starmer:There is quite a lot of criticism this morning, not just from other parts of the political spectrum, because you'd expect but from think tanks even from labour-friendly think tanks including the resolution foundation about this question of freezing income tax thresholds now in opposition rachel reed when she was shadow chancellor said that that hit working people in their pockets
18:25Rachel Reeves:do you agree well i think she she leveled with people about that in her statement uh yesterday um we we face a very difficult environment that we're in things are changing all the time we are
18:38Keir Starmer:But you are increasing taxes on working people, aren't you?
18:40Rachel Reeves:We are dealing with years and years of austerity. We need to invest in the country. We need to invest in public services. We need to invest in the infrastructure so that we can turn the economy around.
18:52Keir Starmer:But would you accept, Lucy Powell, would you accept that you are increasing taxes on working people?
18:56Rachel Reeves:We have frozen the thresholds, as you rightly say. And obviously, everybody is having to pay towards that. But we have introduced a range of other measures that really will support the most in need in our...
19:11Keir Starmer:You said you wouldn't increase taxes on working people. That was a manifesto promise.
Read the full transcript
19:15Rachel Reeves:I've got the manifesto right here in front of me, Lewis, because I keep a copy on my desk at home. And, you know, I think that the budget set out was very strongly in the spirit of the manifesto. there's a lot of things in our manifesto, like reducing child poverty, like getting waiting lists down, like ensuring that we deal with the cost of living crisis, that we get wages up, that we build more social housing. There's a huge programme that we set out in this manifesto. And this budget is not the only thing, this budget is not the only thing we're doing. It's part of that programme of renewal that we set out very strongly in our manifesto that we're delivering on people.
19:53Rachel Reeves:And the first word it says there is change and people want change they want change the way the economy works the way the country works and that's what we're setting about doing and look and I'm up for that fight I'm up for that conversation about who pays and how that's how that's done and that's that's what I think we should be taking head on in the coming weeks.
20:14Keir Starmer:We interviewed one of the treasury ministers yesterday Torsten Bell and tried to ask the same question why is it so difficult just to give a straight answer to that simple question, are taxes going up for working people? The answer is yes.
20:26Rachel Reeves:Well, more people clearly are going to be drawn into paying different levels of taxes. That's what Rachel made absolutely clear. She had a clear ask there. She had a clear ask. She had a clear ask. But our manifesto, you know, I'm very happy with the fact that our manifesto, we are following through on our manifesto commitments which are far ranging and are really important and i'd sure i'd really like to talk to you about how we are doing some of those things because there are deep there are deep problems in the way in which our economy has worked over the last well let me just ask you
21:04Keir Starmer:those we're talking about the manifesto and there was that whole period maybe a week two weeks where we thought income taxes were going to be increased and there was all that pitch rolling and the extraordinary Rachel Reeves news conference that took place at 10 past eight in the morning where she kind of hinted at such. I was told there were two reasons principally why she didn't go ahead with that. One was a Danny Finkelstein op-ed article saying that she would have to resign if she did that. The other was Lucy Powell.
21:36Rachel Reeves:Well I think I'm quite happy to have influence which I I have influence. We are one Labour team working through these difficult issues and questions, trying to make the right decisions for the country. And it isn't easy because the legacy that we are dealing with is deep and difficult. And it is going to take long term decisions to turn those things around. Sure. So let me just ask, can I just ask you this? Look, I am pleased that we are sticking by our manifesto commitments. I think that's important that we do that. And they include big, strong commitments to reducing child poverty, to reducing waiting lists, to making the country work in the interest of ordinary working people, to increase wages, build social housing.
22:25Rachel Reeves:All the good Labour things that we were elected to do. And this budget this week was a clear Labour budget that we are now clearly governing as Labour. And I think that's something we should be welcoming.
22:38Keir Starmer:me can can i ask you how much input you had into the framing of the budget were you at political cabinet meetings were you at cabinet meetings i just kind of want to get an impression well i'm
22:48Rachel Reeves:not going to go into all the sort of private private discussions or anything like that but look i'm the deputy leader of the lane party i think when i was last in your studio you asked me about uh you know would i uh be able to to influence things would i be able to to affect my role as deputy leader and yes I am doing that and I'm really clear about that operating politically helping the Labour government to tell that strong story about our Labour values and our Labour purpose and you know I fully support Rachel and Kia in the decisions that they've taken this week which are Labour and do show our values and our purpose and you know and I'm really up for having that that big fight with our political opponents especially on the right who say that we shouldn't be taking action to tackle child poverty who say that we shouldn't be taking the steps that we are taking to make the tax system fairer and I disagree with them on that and I'm and I'm up for that argument and I'm up for that fight.
23:51Keir Starmer:Did you argue against breaking those manifesto pledges because that was clearly the direction of travel?
23:57Rachel Reeves:I don't know if it was the direction of travel or not we're all I think we can I'm sure that there'll be long long discussions about all the sort of speculation in the in the lead up to to this particular budget but I think what we what we all wanted and actually what Rachel and Keir really wanted as well was that we were we were clearly delivering that Labour budget a budget that was about change it's about changing the way the economy works that the Tories and the form who are economic bedfellows completely locked in in terms of their view of how the economy works, which is a trickle down economy, a status quo economy.
24:38Rachel Reeves:We want to change the economy so that it works in the interests of the many. And it's going to take more than one budget to do that. It's a whole series of things that we're doing. And, you know, and I'm here to help tell that story and make sure that our values and our purpose really do shine through as the Labour government.
24:57Keir Starmer:Do you think this was a different sort of budget, a different sort of budget politically, which I think you sort of hinted at just now, than Rachel Reeves' first budget?
25:04Rachel Reeves:Well, I actually thought our first budget was a very Labour budget, but maybe we didn't follow through strongly enough in making some of those arguments at that time. But, you know, the first Labour budget also prioritised investing in the NHS, long-term capital investment so that we can increase productivity and make sure that we've got a higher wage, some more secure employment economy and so on. So I think we are doing these, we've done lots of good Labour things over the last 15, 16 months since we won the election. But what people have been saying to me and to others in recent weeks is they want to see this clearer sense of purpose.
25:49Rachel Reeves:They want to see the Labour bit of the Labour government coming through a lot more strongly. And that's why I really welcome the measures and the big, bold decisions. They were big, bold decisions. Rachel knew that lifting the two-child benefit cap would be decried by our political opponents and would lead to the right-wing press and others saying it was the wrong decision. It was the right decision to lift it because in the long run, we pay a lot more for dealing with all the consequences of child poverty than lifting the cap alone would cost.
26:26Keir Starmer:When you say it wasn't Labour enough and now is more Labour and needs to be more Labour still, do you mean more left-wing?
26:32Rachel Reeves:No, I think people want a clearer sense of our story, of our purpose, of our values coming through. And that's not to say that things that we've been doing up till now have not been Labour. I just think we haven't been able to more strongly tell that story. And that's why taking some big decisions, some big, bold, strong decisions that Rachel has taken in this budget, I think really help us to do that. And they reopen more strongly those political divides that exist in our politics today, with the Tories and reform on the one hand, who want, as I say, more austerity, they want trickle down economics.
27:16Rachel Reeves:They want the status quo to carry on in our economy. And you've got Labour on the other side. We want that big change in the way that the country works, in the way that the economy works, so that ordinary working people get the benefit of economic growth and our economic prosperity. And we are going about doing that.
27:37Keir Starmer:But ordinary working people are going to be paying for the huge amounts of extra money that's going to be spent on welfare with no sign that any serious meaningful reform in the welfare budget is taking place. We saw what had happened in the summer and, you know, the failure of that, which I think you kind of said it was a misguided adventure in the first place to do that welfare reform. We've also had the OBR saying that there There is no measure in this budget that is going to have a serious impact on economic growth. So the economy is not growing. Taxpayers are paying more. And there is no attempt to cut down the kind of ballooning welfare bills either.
28:19Rachel Reeves:Well, the stagnant growth we've seen over the last 15 years, you know, that is going to take a while to turn around. But the OBR, they make these forecasts and they usually have to end up revising them up as they have done for the short term growth in their latest forecasts. They haven't costed in lots of measures that we've already taken and that we are taking to increase growth. So let's see what actually happens there. Look, on welfare, we have been, I mean, under the Tories, by the way, welfare spending ballooned at the same time that child poverty went up massively as well, because they were constantly chasing in the welfare system that we had and the economy that we had in the past and that we're trying to change.
29:11Rachel Reeves:we are spending a lot of money dealing with the symptoms of a broken economy and not its root causes. So we are effectively in this country now we subsidise low pay, we subsidise high housing costs and we pay more and more for dealing with the symptoms of things like child poverty than we do in investing and getting them right. So we need a higher wage, decent job market in this country, We need to build more social housing, which is what we are doing to drive down those high housing costs, which we subsidise. And then we need to deal with the root causes of child poverty, better education, better health, people having more money in their pockets to bring up children outside of poverty and not just spend more and more on food banks, on charities, on teachers having to spend time supporting children and all the costs that linger through our economy for a long time.
30:12Just as an example, children in poverty,
30:16Rachel Reeves:only a quarter of them go on to get five good GCSEs. You know, my kids, in a more affluent background, my kids, three quarters of them will get five good GCSEs.
30:29Keir Starmer:Lucy, can you imagine a world, can you imagine any world where Labour MPs will go through the division lobbies to vote for welfare cuts to keep the cost down?
30:37Rachel Reeves:As I've said time and time again, the PLP are absolutely up for a conversation and up for looking at how we can reduce welfare and welfare reform.
30:50Keir Starmer:It needs to be a bit more of a conversation, though, doesn't it? It is spiralling, the costs.
30:55Rachel Reeves:It's not just a conversation. We are up for that. And by the way, one of the other real legacies, in our welfare system at the moment, which we're seeing so starkly coming through, is the number of young people outside of jobs or education.
31:11Keir Starmer:Would you ever vote for cuts? Would you ever vote for cuts? Can you imagine a world where you voted for actual cuts to welfare?
31:17Rachel Reeves:We need to reform welfare. I think when we're trying to short-term cut welfare, not looking at the outcomes of how we can deliver better outcomes for people.
31:28Keir Starmer:Sure, but we do need to spend less, don't we? We do need to spend less. So I'm just asking you, is there a world, is there a package where you could vote for cuts in welfare?
31:36Rachel Reeves:I would vote every day of the week for better systems that deliver better outcomes, often requiring the first instance for you to invest in that, which over time leads to those budgets going down and down. I'll give you another example, by the way. Here in Manchester, we're the only local authority where the number of children going into care is now falling, not rising. on this is a very very high need poor city and why is that because the city council and partners up here have invested hugely into early intervention and support in the very earliest years through the sure start model and other measures to make sure that that families are better supported so that children don't need to go into care so that is now reducing the children's services bill in this city and it's taken some investment to do that it's delivering better outcomes and it's reducing costs but it's not driven um purely by a need to short-term reduce
32:36Keir Starmer:uh costs but at the moment right now combined incapacity and disability benefits are we now spending about 64 and a half billion pounds on those benefits that is up by 40 in real terms since 2013 so there clearly may be a moment when you and labour mps are confronted with a prospect of not just reforming the system, not just spending money in the short term on the system, but having to vote for cuts. I'm just going to ask one more time. Is there any world where you would vote for a cut, cuts in disability-related benefits?
33:03Rachel Reeves:Well, it's a bit of a ridiculous question, to be honest. It's not really. Because I want to get the welfare bill down because the welfare bill being so high is a symptom of failure. It's a symptom of our failure to deal with the root causes of why welfare is so high. People out of work, people who are in work, who can't, but work doesn't pay for them. So we're having to subsidise it. People in expensive, yet awful, awful private rented housing. People struggling to get by. People on, young people who after Covid, I've got a 21 year old and I'm sure you've experienced this as well. young people who were completely thrown on the scrap heap by the previous government after Covid because they didn't invest in those Covid catch-up years that they needed to do, who are now consigned to a life of being on benefits.
33:56Rachel Reeves:We've got to turn that around. I want to see the welfare bill coming down because it's a symptom of failure across a range of things. And there's no silver bullet for that. Just taking money off people doesn't solve that problem. It just creates you other problems elsewhere. We've got to deal with the root causes. And that's what we are doing as a Labour government, investing in social housing, a young people's job guarantee, making sure that work pays and that there are decent jobs there for people investing in the new industries of the future. And that's how we will get the welfare bill down.
34:29Keir Starmer:This budget is being characterised as more about party management than what is right for the country. Has Keir Starmer bolstered his position and Rachel Reeves bolstered her position? Are they there now for the long haul or there are still dangers ahead come the May local elections?
34:45Rachel Reeves:They were always there for the long term. They are in it for the long term. We support them in the long term.
34:52Keir Starmer:But you know how sulphurous, you know how sulphurous the mood has been on the back benches. Arguably, your election as deputy leader was the absolute vivid symbol of how unhappy Labour back benches were with the direction of travel. and you've influenced the shape of this budget. I ask you again, are Labour MPs happy now?
35:12Rachel Reeves:This was a good, strong Labour budget, which we are all absolutely behind. We really, really are. I just want to make that absolutely clear. Keir and Rachel were brought in, or elected rather, as our Prime Minister and our Chancellor only 15, 16 months ago. And they are in it for the long term. and we are all in it for the long term. And we all were...
35:38Keir Starmer:So what would you say to your colleagues who are still thinking, maybe we can change the Prime Minister?
35:44Rachel Reeves:Well, they're not thinking that, absolutely. And we will all be supporting, continuing to support them going forward. And I do reject this idea that somehow this is a sort of budget for Labour-backed benches, not a budget for the country. You know, tell that to the five and a half thousand children here in Manchester Central who are now over the next two or three years going to be lifted out of poverty because of decisions that we have taken. These are the right decisions for the country. And this is a good Labour budget. And it's one that we are all going to proudly go through the voting lobbies next Tuesday to vote for.
36:27Rachel Reeves:Every single Labour MP will be doing that.
36:28Keir Starmer:You're saying that there's no one's plotting to remove the prime minister?
36:31Rachel Reeves:No.
36:32Keir Starmer:No one at all? All those plots we've been reading about centred on West Street and others, just nonsense not happening. There are no Labour MPs. There are no Labour MPs, Lucy, who are thinking it might be a good idea to remove the prime minister in the next 12 months.
36:43Rachel Reeves:Well, it's not it's not a good idea. You know, we've got to face out to the to the country now. And we've got to be really clear about that, about our purpose, about our values, about what we are doing. We've got a big job of work to do. And it's not over just because we've delivered, you know, this budget this week. This budget this week is helping us to re-establish the agenda that we're pursuing to help us have those big arguments out in the country about the long term decisions that we are taking to get the country back on track in all of those ways, whether that is the public services, whether that's good, decent jobs, but whether that is about the country and the economy working for the many and not the few.
37:29Rachel Reeves:and I know that every Labour MP this weekend and beyond is going to be out making those arguments and they're the arguments we should be talking about and not any other tittle-tattle.
37:41Keir Starmer:So you're 100 % confident that the Prime Minister and Chancellor will still be Prime Minister and Chancellor taking your party into the next election?
37:46Rachel Reeves:Yes.
37:47Keir Starmer:Lucy Powell, Deputy Leader of the Labour Party, thanks so much. Thank you.
37:51Rachel Reeves:Thank you.
38:01Keir Starmer:The News Agents. I thought what was interesting there with Lucy Powell was she wasn't going to obviously give me chapter and verse of the meetings that she had been in. But I thought there was a kind of most smug satisfaction that, yep, I've had an influence. You want to believe it. I've played my part in shaping this budget. And I think that, you know, an awful lot of Labour backbenchers will be very happy that she has. I'm sure her election in and of itself, I'm sure, you know, was significant in terms of the psychology of number 10 and Keir Starmer's thinking because they could see that even within the Labour Party, his position was becoming shakier and more difficult.
38:36Keir Starmer:And therefore, that would have affected the sort of course of course of the budget. And as we say, you know, answer to your question, 100 percent, 100 percent. Exactly. And she didn't always sound like that during the leadership campaign, notably. I thought that her answers on welfare were very, very revealing in a sense that, look, look, there is a lot of good reasons. There are a lot of good reasons why welfare spending have gone up. We should never forget as well that the mainstay of welfare spending is pensions, which, you know, government after government has prioritised via the maintenance of the triple lock.
39:05Keir Starmer:Nonetheless, we can see that particularly with sickness and disability related benefits and other forms of benefits as well. These are rising very, very rapidly, particularly among young people. and I think that you can kind of see in her answers or hear in her answers the psychology of a lot of Labour MPs which is that Labour has sort of got itself into a position psychologically perhaps because of the MPs that it's got and their background sometimes where it is almost a sort of third rail to even contemplate voting for something that might cut discreet or particular benefits and that that is on Labour in some way and I think that is a complicated very complicated in a very difficult bit of psychology to get into because it almost implies that almost any sort of expansion of that spending and the state is inherently a good thing.
39:51Keir Starmer:Now, I hear what she's saying, of course. Like, very often when you reform welfare, it might mean you have to spend a bit more up front in order to change the system, and you don't want to do what the government did, which is just come along with some blanket cuts and just say, here you go, you want to think about it more thoughtfully. But ultimately, the aim, there's got to be two aims with welfare reform, right? Like, one is to create a better system which is more helpful to people, both who really need that assistance but also in helping them get back into work but also it will be to spend less money ultimately than we might have done otherwise because frankly the British economy isn't sufficiently productive right now to justify or to pay for the sheer gallop you know the galloping rates have increased that we're seeing well look you talked about the real term growth in kind of disability benefits that are being paid now by the state what if they continue to grow do you come back for more and more and more taxation to cover that or do you start saying well hang on is we really that sick as a society compared to our european neighbours where they're not seeing those same increases in spending in the way that we are here and those are big questions for labour to answer at the moment looking at this parliamentary labour party i'd say there is absolutely no appetite whatsoever for voting for welfare cuts we've seen it in practice this summer and you know unless it is dressed up very very differently it's hard to see them doing that again.
41:12Keir Starmer:And some analyses have said, and I mentioned that 67 billion figure to Lucy Powell, some analyses have said that working age sickness slash disability and incapacity spending could reach over 100 billion by the end of the decade. I'd say that's up from about 65 billion now. You know, that is not a sustainable rate of increase. It's not sustainable for the people involved. It's not sustainable for the British state. It's also not Labour. It's not a Labour thing to want people to see. I mean, Lucy Powell mentioned Labour and Labour values many, many times in that interview. I'm sure she would agree with the statement and it isn't Labour to want to see people be on benefits when they don't need to be and when they can be in work and they can be living a more flourishing life and so on.
41:47Keir Starmer:But then it's all very well saying that. At some point, you might have to vote for something that does entail maybe a bit of pain or a bit of difficulty in order to get to the end goal. And yeah, you want to do it comprehensively and you want to do it thoughtfully. But I'm struck by the lack of urgency about it because this is a huge part, a hugely increasing part of public spending. And we should not forget, you know, for every pound, for every pound that we spent on increasing that budget is a pound less that we can spend on education education which now for example is it looks like it's forecast to fall in real terms in terms of school place uh in terms of school funding per pupil on defense on the health service on all of these things and yes sometimes those things are interrelated those bits of spending but nonetheless you know i would have thought that certainly for any labour mp they would far rather see many pounds spent as possible on education and on health and whatever it happens to be than on spending on a system which is clearly not fit for purpose and is getting worse in slightly more positive news for the government though which is something we'll be hearing about a lot i'm sure there were some figures released today not to do with the economy but with my connected with migration net migration the ons is saying has fallen sharply to just over 200 000 in a year to June.
43:00Keir Starmer:That is a fall from 649 ,000 for the year before. And it's a drop of nearly 80 % from its 2023 peak. So, you know, there's a very substantial fall. Going back to the sort of figures that we used to see pre-Brexit, about 200 ,000 a year. Obviously, the government will be talking about this a lot. It's fair to say some of it is definitely down to the reforms that the Conservatives brought in due to in the tail end of their period, particularly James Cleverley as Home Secretary. But, you know, Politics is politics, and I'm sure the government won't be having that. The government will be taking a victory lap on that.
43:32Keir Starmer:It's also to say a lot of people are leaving the country as well. Which is not such good news necessarily. Perhaps not such good news. Might not be. Some of it is obviously immigrants going home. Some of it is British people going to move abroad. But anyway, I think that is the 204 ,000 in the year to June. That is a figure you'll be hearing a lot over the course of the next few months. Well, I promise that Lewis and I will be here tomorrow. We're not going anywhere. We're not emigrating. We're not emigrating. Some of them want to re-emigrate us. That's the latest thing. And we will be joined by the acclaimed, the brilliant novelist, Sir Salman Rushdie.
44:01Keir Starmer:And that should be fascinating. See you then. Bye bye. Bye bye. This has been a Global Player original production.
From the publisher
Keir Starmer and Rachel Reeves have been out defending their Budget - denying that the tax-raising measures contained within it break the Labour manifesto's promises around taxes on working people. Instead they have been trying to focus on the additional money for the NHS, lifting children out of poverty, and raises to the minimum wage.
Yesterday's package of measures amounts to a fundamental shift in both the size of the State and the size of its tax take. It looks set to draw the political divide and define the political debate into the next election. So does Labour need to start making a better case about why it has moved the country in that direction?
Jon and Lewis speak exclusively to Labour's deputy leader Lucy Powell. She broke ranks before the Budget to warn against the idea of raising income tax - how does she feel now?
The News Agents is brought to you by HSBC UK - https://www.hsbc.co.uk/