Rachel Reeves’ Spending Review does more than set budgets. It exposes a contradiction at the heart of Labour’s approach to government: a party that wants to rebuild the state won’t take the hard decisions needed to make that possible. The review was more painful that it needed to be for Labour, because Labour MPs have shied away from serious welfare reform.
Two mistaken ideas dominate much of the progressive conversation about the public finances. The first is that the state can go on doing more and spending more forever, with no real constraint. The second is that all talk of welfare reform is right-wing cruelty. Unless and until Labour challenges both ideas head-on, hopes of ‘national renewal’ will be forlorn.
A pound spent on welfare cannot be spent on services.
Zoom out a bit from the spending review and you see that the big story is this: the government is now squeezing the departmental spending budget (known in Whitehall as the Departmental Expenditure Limit, or DEL) not because it wants to, but because it has avoided confronting the larger challenge of welfare (part of Annually Managed Expenditure, or AME).
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