The curse of tactical government

Good afternoon. The reviews are in for Rachel Reeves’ long-trailed Spring Statement and the critics have been left rather underwhelmed by a performance that did too little to dispel the impression that this is a government leaving itself at the mercy of events in an increasingly volatile world.

That impression matters because it colours how government policies are perceived: cuts to welfare and the civil service could be part of bold plans to get young people back to work or the beginning of a fundamental rethinking of the administrative state . . . or they could just be spending cuts.

By being so narrowly tactical in her approach — trimming the fiscal sails of government just sufficiently to stop it capsizing but not enough to avoid future wobbles — Reeves generates uncertainty from an event designed to have the opposite effect.

As Paul Johnson at the Institute for Fiscal Studies observed, the decision to keep the same limited fiscal headroom that put Reeves in this position in the first place looks guaranteed to fuel speculation over the government’s finances, not quash it.

“There is a cost, both economic and political, to that uncertainty,” says Johnson of Reeves’ failure to put speculation over her fiscal ‘headroom’ to bed. “The government will suffer the political cost. We will suffer the economic cost.”

And the next few months are likely to be bloody. After this week’s 25 per cent tariffs on cars, next week the Trump administration is set to announce the full suite of ‘reciprocal tariff’ measures which — even if the UK succeeds in avoiding the worst — will have a negative effect on trade and the global investment environment. (The Office for Budget Responsibility reckons a full blown trade war will knock 1 per cent off its growth forecast.)  

Even without the Trump effect, the OBR is already forecasting “weak growth in imports and exports over the medium term”, something it continues to blame on the long-term effects of Brexit. The OBR’s prediction of a 15 per cent long-term hit to UK trade remains unrevised.

Alongside that, from April 6, the increase to employers’ national insurance announced last October will kick in. That has already caused a stink with business, but quite quickly it will have a real-world impact on charities and other organisations that provide services to a state now facing further cuts. 

Then there is the outcome of the June spending review, where so-called ‘unprotected’ departments — everything except health, defence and education — are going to see real-terms cuts of 0.8 per cent, according to the OBR. When those land, that’s going to rub salt into the wounds of Reeves’ recent cuts to welfare spending. 

The government has blithely taken to asserting that we’re “not returning to austerity”, but in many areas it will start to look like that — not least because these cuts land on exhausted local government and social institutions that have experienced austerity. 

A government of tactics, not strategy

The original sin of this government was that its policy agenda, at the outset, was tactical rather than strategic. The “five missions” spoke to the idea of a grand plan, but the big policies — on tax, on Europe and on immigration — were fundamentally tactical in nature. It was a blueprint for outflanking Tory opponents, not structural reform. 

The pre-election fiscal forecasts made plain that, whoever won the election, taxes would have to go up and yet Labour (tactically trying to avoid traps being set by their Conservative opponents) backed itself into a corner on tax that led inevitably to last October’s business-bruising Budget.

When it came to repairing the damage done by Brexit — despite talking of “tearing down the barriers to trade” with Britain’s largest trading partner — the plan was similarly tactical: small-bore ideas that (unless something changes) have led, inexorably, to a tactical, small-bore ‘reset’ negotiation with the EU.

And on immigration, the third rail of British politics, no space was left for a youth mobility deal with the EU that might have opened other doors, or even to import the skills needed to deliver Labour’s own growth agenda — building houses, expanding the electricity grid and competing for top-end global talent in AI and life sciences.

It’s not that all Labour’s policies are hopeless, far from it — as the OBR acknowledges the planning reforms are potentially significant, the commitment to ringfencing capital investment is laudable, the pro-growth push on regulators long overdue — but the tactical timidity that frames them undermines their potential.

Cutting-edge, or just plain cuts?

That makes it hard for the government to make a convincing case that its plan to cut 15 per cent of the civil service workforce is about more than a dash for cash, but a much-needed strategic rethink of an ailing British state.

The launch recently of yet another Whitehall ‘red tape challenge’ that pledges to cut bureaucracy for business by 25 per cent begged similar questions. 

There have been multiples of these challenges in the past decade, none of which have really worked, as we explain here. A more strategic approach is to decide what you really want to get done, then where processes need to be streamlined to achieve that goal. 

Because, as both main political parties have come to realise, the state needs reforming. This week the Reform think-tank (no relation to the political party) published a thought-provoking essay about the curse of ‘everythingism’ that suffocates the modern British state.

In short, what starts as ‘joined-up thinking’ means that key objectives become ensnared in thickets of legal obligations and concomitant ancillary policy objectives that distract from the core objective. 

As author Joe Hill puts it, in this ‘everythingism’ world: “Planning policy is not for getting high-quality housing near the best jobs, but creating local jobs, hiring more apprentices, and enhancing biodiversity.”

His critique comes with a prescription for “ruthless prioritisation” which itself requires a dismantling of a quangocracy and a civil service that is institutionally programmed to avoid the hard trade-offs needed to deliver tightly focused objectives. 

Fixing these issues doesn’t need the moon-shottery of Dominic Cummings; or indeed Labour ministers’ empty repetition of “tech and AI”, but hard-graft policy work designed to fix the delivery arms of the state.  

Simply ripping up the status quo and assuming it will shake the state out of its torpor is not a solution — as Brexit, which was itself a very deliberate attempt at creative destruction, has so very clearly demonstrated. 

We wait to be surprised, but a government so firmly with its back to the wall, fiscally speaking, will struggle to convince even its well-wishers that this latest promise of a Whitehall purge is about more than just plain cuts, which can bring their own costs. 

Just look at what happened to the part-privatisation of the probation service in 2019, or the closing of the National Audit Commission in 2010 for examples of where cuts led to false economies. 

Let’s hope it’s different this time. But as one senior Whitehall official (who can see the need for fewer, better-paid officials) put it: “It’s either just a standard Treasury cost-cutting exercise, or it’s a moment to be used more imaginatively to push change. At the moment, the dynamic feels very much like the former.”

Are you enjoying The State of Britain newsletter? Sign up here to get it delivered straight to your inbox every Thursday. Do tell us what you think; we love hearing from you: stateofbritain@ft.com

Britain in numbers

This week’s chart is taken from polling that was commissioned before this week’s ‘Signalgate’ fiasco, where top Trump White House officials, including the defence secretary and the vice-president, discussed plans to bomb Houthi rebels in Yemen.

For European governments what jumped out was just how vituperative Pete Hegseth and JD Vance were about European ‘freeloading’ — not just in failing to defend their own backyards, but also in underwriting “global commons” like the shipping lanes of the Red Sea. 

Indeed, judging by those exchanges someone in the White House is currently working out how to bill the “PATHETIC” Europeans for their share of the cost of the strikes. 

If any European governments were still clinging to the idea that the Trump administration’s animus towards Europe was at least partly performative, then these exchanges will surely have disabused them.

The ‘sane-washed’ version of the Trump administration likes to say “we’re all friends and allies, really, but we understand that Trump uses colourful language sometimes to, rightly, nudge us in the right direction on defence”. But these exchanges make clear that for the leading figures in Trump 2.0 the anti-Europe sentiment really is a gut call. 

The looming reciprocal tariffs announcement on April 2 will be another manifestation of this deep sense of grievance, which is felt both in terms of economic fairness but also in those ideological, culture war areas around free speech, as Vance demonstrated in his Munich Security Conference speech.

This remarkable chart from the new polling by Stonehaven and Public First that we published this week shows that — even before Hegseth and Vance’s private comments were exposed — the public senses the shift.  

More Brits now think (polling was on March 11-15) that the French would come to the UK’s aid militarily than the US! Given the depth of the UK’s historic security ties to Washington and the caricaturing of Europe and France by the British tabloid media, that’s truly quite something. 

Data visualisation by Alan Smith

The State of Britain is edited by Gordon Smith. Premium subscribers can sign up here to have it delivered straight to their inbox every Thursday afternoon. Or you can take out a Premium subscription here. Read earlier editions of the newsletter here.