Were the prime minister looking forward to the long premiership he expected after his landslide general election win two years ago, he might have got away with the £4.7bn “black hole” in his Defence Investment Plan (DIP).
Sir Keir Starmer’s excuse is that it is normal practice for some of the arrangements in paying for such plans to be revealed at the next available fiscal event – a spending review, mini-Budget, or Budget.
Besides, there is assumed “fiscal headroom”. All completely normal. Except, of course, that Sir Keir and, presumably, his chancellor, Rachel Reeves, will be long gone by the time of the next Budget. It will be up to Sir Keir’s likely successor, Andy Burnham, and a new chancellor to plug that gap, and many others. What should have happened, had the prime minister and Ms Reeves not argued and dithered for so long, is that the money would have already been accounted for at the Budget last November. Instead, it is unfinished business. Some “legacy”.
The DIP may be inadequate to the task and replete with the kind of obfuscatory public accounting the Treasury is so good at. But a brazenly unfunded commitment, no matter how modest, brings back bad memories of the “mess the last government left behind”, which Sir Keir Starmer so often complains about. Now, in his last weeks in office, Sir Keir has committed the same fiscal sin in his DIP as did Rishi Sunak and Jeremy Hunt in their final public spending plans.
It is simply not acceptable for the prime minister to inject elements of fantasy into the official plan for the defence of the realm. Worse, the DIP is supposed to be his legacy, helping to mark his place in the history books; something to be proud of. Instead, he now looks more like someone sneaking out of a bar and leaving the next guy to pick up the tab.
Reportedly, Mr Burnham had been briefed on the outline of the DIP, but not so much on the funding of it. It would be understandable if he felt a little disappointed with Sir Keir’s housewarming present for “No 10 North”.
In fairness to the prime minister, the amount involved is small in relation to the British state’s annual spending of some £1.3 trillion. But it hardly inspires confidence and has provoked unnecessary ridicule. It highlights the wider, and much more profound challenges the British state faces: how to balance the need to boost defence in the face of intensifying threats with funding the welfare state in an era of rapidly deteriorating demographics.
Sir Keir failed to square that circle during his brief premiership, and it falls to Mr Burnham to try again.
Recently, Mr Burnham has said he is “not squeamish” about cutting benefit spending, and he must know the damage the slur that “Labour is the benefits party” is inflicting on them. He has been advised by at least two of his predecessors, Tony Blair and Rishi Sunak, that any prime minister enjoys maximum leverage in their first phase in power. It would, for example, be pretty unthinkable for even this ill-disciplined parliamentary Labour party to subject its new leader to an historic defeat within weeks of taking office. Unlike Sir Keir, who was respected rather than loved by his party, Mr Burnham is something of a darling, if not a hero, and even most of the few remaining Starmerites have pledged allegiance to him. Some might hopefully cite the “Nixon goes to China” precedent.
Radical change can be achieved only by someone who has the credentials and trust to carry it through. Mr Burnham might be able to persuade some of the previous rebels to go through with painful changes his predecessor simply could not. Most of all, by stressing the need to invest in moving vulnerable people into work rather than merely saving the Treasury money, Mr Burnham and his colleagues could actually make a real difference to their lives.
Also driving the case for change is the sheer size of the benefits bill in the near future; over £400bn a year by the end of the decade, more than the defence, NHS and education budgets combined. Around half of that is for the state retirement pension, and all the more reason to adjust the “triple lock”. It almost defines “force majeure”.
Change will require courage on Mr Burnham’s part. After all, he encouraged the rebel Labour MPs a year ago when he joined them in rejecting Sir Keir’s changes to personal independence payments. He said then that those risked creating “unfairness and a divide” among people with disabilities – indeed, it was the genesis of his leadership bid.
Under pressure, Mr Burnham may turn to increasing taxes once again. That would prove economically damaging, electorally disastrous, and a gift to his internal and external opponents. What he has said is that he rejects “crude cuts”. That sounds more encouraging. He must take advantage of the uniquely powerful position he will soon find himself in. But time will not be on his side.
