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23 November 2016updated 30 Jul 2021 6:37am

When the Autumn Statement shows the Tories are vulnerable, why can’t Labour hurt them?

In his response to Philip Hammond’s Autumn Statement, John McDonnell revealed the challenges his party faces.

By Anoosh Chakelian

An £122bn black hole. National debt heading towards £2tn by the end of this parliament. A £21bn deficit remaining in 2020-21. A sharp slowdown in growth. No surplus ahead, missed targets, broken promises, Brexit uncertainty, party divisions.

This really is the dream government scenario to respond to if you’re shadow chancellor. But John McDonnell, Labour’s opposite number to the Chancellor Philip Hammond, didn’t seem to be relishing the opportunity in today’s Autumn Statement response.

Far from his merry outing this time last year, when he waved Chairman Mao’s Little Red Book gleefully before George Osborne, McDonnell seemed subdued at the despatch box when he tried to unpick Hammond’s changes.

He has three challenges.

The first is that Hammond’s problems have led to Labour solutions: increased borrowing, defining the deficit without including investment in the figure, dropping hard surplus targets, relaxing caps on welfare spending (and, as the OBR report assumes, the immigration target). The Labour party is in favour of all these things. It is difficult, then, for McDonnell to hammer the government for following such routes while at the same time proposing similar solutions.

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The second is that Britain leaving the European Union has led to these gloomy financial forecasts; the government is most vulnerable on Brexit. But so is Labour. McDonnell has confirmed that Labour will not vote against Article 50 in Parliament, and is campaigning for “access” rather than membership to the single market.

The party has also been down on free movement, preferring to sympathise with voters who see negative effects of migration. Its position on Brexit, then, is too similar to that of the government (insofar as we know what they don’t want out of the negotiations, even if we don’t know what they do want to do) to truly hammer Hammond on the economic impact of leaving the EU. It means the most criticism McDonnell could level at the Tories on this subject was a dig at Hammond to “stand up to extreme Brexit fanatics”. Because Labour is on board with the less extreme, non-fanatical Brexiteers.

The third is McDonnell’s enthusiasm for being a radical in bank manager’s clothing. Because it seems that, to some extent, the clothes maketh the politician in this case. In the eyes of the socialist left, he has been too conciliatory to tear up the fiscal consensus, which slightly takes the momentum out of his and Corbyn’s revolutionary vision for the party. McDonnell has made the odd decision to support Hammond’s tax cut for high earners. He backs plans to raise the point at which you start paying the 40p rate of tax to salaries above £45,000 – with the view to it hitting only those earning over £50,000 by 2020.

The Greens call this a huge “handout” to the top 15 per cent of earners, and are hitting Labour hard for supporting it. Part of Corbyn’s appeal was to break political rules for a more radical agenda – rules like Labour leaders always bottling it when it comes to taxing the rich. Yes, McDonnell called for a 50p top rate of tax, but given his enthusiasm for raising the 40p threshold, it just sounds like a faint echo of the constant “tax cut for millionaires!” battlecry of the Ed Miliband era. Not much new and radical there.

Brexit consensus and compromise of socialist values leave him with precarious support on the left, and his left-friendly solutions to economic problems are now being embraced (and therefore neutralised) by the Conservatives. This leaves him stuck in the middle, with very little leeway for taking advantage of the government’s plight.

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