It wasn’t a speech, so much an exercise in complete denial.
Beaming from ear to ear, the Chancellor stood up at Mansion House last night and delivered an address of such spectacular and inventive fiction that J K Rowling would have been proud.
In Rachel Reeves‘ mythical world, the Government has ‘restored Britain’s reputation as a beacon of stability by putting the public finances back on a firm footing’. Ministers have succeeded in ‘getting debt on a downward path’.
Thanks to these Herculean efforts, ‘the stability that we have restored is already delivering’.
Unfortunately, in an effort not to scare the children – or the markets – a few chapters were missing.
The word ‘inflation‘ did not feature. Understandably, given today’s damning rise in the Consumer Price Index has driven a coach and horses through the ‘stability’ narrative.
Nor was there any mention of the evidence that Richard Hughes – Director of the Office for Budget Responsibility – gave to the Treasury Select Committee earlier in the day. That’s when he had said in typically understated fashion there were ‘reasons to be concerned about the level of UK government debt’.
This hardly aligned with Reeves’ rose-tinted claims that debt was following a downward path.
Chancellor Rachel Reeves stood up at Mansion House last night and delivered an address of such spectacular and inventive fiction that J K Rowling would have been proud, writes Dan Hodges
Rachel Reeves speaking at the annual Financial and Professional Services Dinner at Mansion House in London
And there was another glaring omission – that nasty three-letter word ‘tax’.
In the entire speech, taxation was only mentioned once – in the context of the US trade deal – where she claimed new tariffs had been avoided.
Which was odd, given that over the weekend it had been confirmed by one of Reeves’ colleagues the Government’s entire economic strategy had been junked.
In a Sunday interview, Transport Secretary Heidi Alexander confirmed that Labour’s manifesto pledge not to raise taxes on ‘working people’ would now only apply to those on ‘modest incomes’.
What was Labour’s definition of someone not on a ‘modest income’, Downing Street was asked. They refused to answer.
Reeves pointedly refused to address this issue last night.
When pressed on issues relating to taxation, in fact, she now has a boilerplate response: ‘No prime minister or chancellor is going to write a Budget in advance.’
Except that’s not a rule she herself has been minded to observe.
Last December, at the annual conference of the Confederation of British Industry, she delivered the following cast-iron pledge: ‘Public services now need to live within their means because I’m really clear, I’m not coming back with more borrowing or more taxes.’
The fact that she didn’t feel able to repeat that pledge last night – or even touch on the issue of taxation at all – is instructive.
In fact, Reeves’ silence spoke volumes. Because it’s becoming clear the Chancellor will not ensure public services are forced to live within their means.
And that, despite the gaping gaps of the Mansion House speech, she is going to come back for more taxes and more borrowing.
We can chart the slow but steady collapse of the Government’s fiscal policy through the various statements and briefings issued over the past month.
In her Budget, for example, Reeves had promised Labour would not freeze tax thresholds because such a measure would ‘hurt working people’.
Yet last week, when Kemi Badenoch invited the Prime Minister to repeat that commitment, he demurred.
No sooner had he sat down than up popped former Labour leader Neil Kinnock to float the idea of a ‘wealth tax’.
This was swiftly endorsed by Labour’s leader in Wales, Eluned Morgan. Was this something Downing Street was actually looking at, I asked a senior government official?
‘A number of options are on the table,’ I was told.
So this is the true trajectory of Labour’s tax strategy – the one that Reeves so conspicuously failed to articulate at the Mansion House.
The commitment not to hurt ‘working people’ has quietly been dropped. The idea of a wealth tax is suddenly being floated.
Everyone on middle-incomes – or above what Labour arbitrarily defines as ‘a modest income’ – is in the Chancellor’s sights.
For now, Reeves wants to maintain the conceit that everything is going to plan. Or, rather, she is trying to buy herself time to cobble together a new narrative in which the breach of her previously unambiguous promises not to raise additional taxes or borrowing can be justified.
Starmer and Reeves have argued that the U-turn on winter fuel payments was down to Labour’s success in stabilising the economy
It’s a challenge that would prove a test for even the finest and most creative minds.
Reeves cannot claim she was ignorant about the tax burden already being shouldered by the people of Britain.
Soon after the election I was talking to one of her senior aides.
‘One thing we’re clear about, there just isn’t scope for major tax rises,’ I was told. ‘People have been hit hard enough under the Tories. If we pile more taxes on, it will crush them.’
Nor can she rehash that now-threadbare excuse trotted out at the start of Labour’s term, namely that the legacy of the Tory’s £20billion ‘Black Hole’ is still forcing ministers into unpalatable choices.
According to Reeves, that hole has now been successfully filled.
Last month, when the Government dramatically announced its change of tack on winter fuel, the Chancellor was crystal clear.
Her new-found largesse was possible because the British economy was now in ‘better shape’ she claimed.
Keir Starmer concurred, boasting that the Government could expand the number of people receiving the payment because Labour had ‘stabilised the economy’.
The reality is Reeves has no excuses. She has boxed herself in with hubris and self-delusion.
Spooked by the negative reaction of business to her tax-raising Budget, she panicked, and offered the CBI assurances she was never going to be able to meet.
Hemmed in by Keir Starmer’s ‘Ming-Vase’ strategy (of promising nothing except a safe pair of hands), she signed off a manifesto pledge not to tax ‘working people’ that she knew full well could not survive the rollercoaster of a five-year fiscal and political cycle.
Faced with the U-turn over winter fuel, she could have sought commensurate savings in other areas of the bloated welfare budget.
Instead, she sought to claim her new magnanimity towards pensioners was the result of her brilliant stewardship of the economy. What rubbish!
So, the Chancellor is left with nothing but her own illusions. And a desperate attempt to construct an alternative reality at complete variance with the lived experience of the people of Britain.
One in which the economy has supposedly been stabilised, even when the prices of goods on the shelves are spiralling.
One in which debt and spending are supposedly being curtailed, even as the Government’s own fiscal watchdog is warning that ‘the UK public finances are in an unsustainable position in the long run’.
One in which the Chancellor can claim she is constructing ‘a dynamic economy on strong and secure foundations’ less than a week after a shock GDP contraction.
And with a straight face, tell the assembled Mansion House dignitaries that her policies will ensure ‘the rewards of hard work are shared’, even as she prepares to break her own vow to protect working Britain from new taxes.
The Chancellor is no longer a politician, but a peddler of fantasy fiction.
‘Rachel Reeves and the Deathly Tax Hike’. Coming soon from all good bookshops.