When last January I spoke to a host of former and current Treasury officials and advisers about the criteria for the role of shadow chancellor, and asked them to name possible candidates, Dodds was one of only eight names that came up. While I think there are several more names who were overlooked by my participants, the reality is still that the post of shadow chancellor is very difficult to fill and there are probably no more than 40 sitting MPs who can do it across both England’s major parties.
So in many ways Dodds’ big speech today was the closest a politician gets to a home fixture – her ability to give wide-ranging speeches about the challenges posed by the changing economic, ecological and social tides is why she is shadow chancellor.
It was these sections that represent a new coherence to Labour’s thinking under Starmer: Dodds, and by extension the leadership, set out what she believes to be the big present-day challenges facing the British economy. Yes, she warned that the “benign conditions” currently allowing the United Kingdom to borrow freely and invest may not persist forever and the government should not assume they will, but she added that, at the present moment, the UK’s economic problem is not a sudden rise in interest rates: it is low income growth, the longest squeeze on wage growth since the Napoleonic Wars, the challenge of rebuilding the economy after coronavirus and tackling the climate crisis.
But it was also a tricky assignment because of the political challenge: to set out Labour’s new fiscal framework.
The challenge that any Labour shadow chancellor has is that John McDonnell – with the aid of his economic advisers – set out in the fiscal credibility rule a fiscal framework that is a) supported by the majority of economists b) firmly within the new consensus advanced by the IMF and other global institutions c) able to command the support of the Parliamentary Labour Party but is also d) associated with a Labour leader who by the time of the party’s 2019 election defeat was incredibly unpopular and e) old news.
So the question is, how do you retain the strengths of McDonnell’s fiscal credibility rule while shedding its weaknesses? Dodds’ answer was to expand it: she laid out new and stronger means by which a Labour government would make sure it kept its fiscal promises, by giving a greater role to the National Audit Office and making the Treasury more transparent, and committing to a new, additional test of government spending: its environmental impact. Although the explicit wording of McDonnell’s rule – that in normal times governments should run a day-to-day surplus while borrowing to invest – was never mentioned, its implicit logic ran through the speech.
Of course, the big challenge for Dodds – and her opposite number, Rishi Sunak – is that at present, the fiscal credibility rule is in any case in abeyance: because the UK is in crisis conditions, the priority at the moment is to fight the recession. The trade-offs of “normal” conditions don’t really apply.
Today, Dodds achieved a politically remarkable feat: she attracted a glowing write-up from the FT’s influential economics editor Chris Giles and an approving tweet from James Meadway, the adviser who more than anyone bar John McDonnell himself shaped the Labour Party’s economic strategy under Corbyn. For all her undoubted qualifications for the job, Dodds may find that maintaining both of those achievements is an impossible task.