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Labour must earn back trust on the economy, says Anneliese Dodds

Tom Rees
·7 min read
Anneliese Dodds - Dan Kitwood /Getty Images Europe 
Anneliese Dodds - Dan Kitwood /Getty Images Europe

Most aspirants to the office of chancellor lay claim to the mantle of financial prudence but Labour’s Anneliese Dodds is perhaps better qualified than most.

Growing up in Scotland, her accountant and business owner father Keith instilled a loathing of waste and mismanagement, which makes her “blood boil” when she comes across it, the shadow chancellor says.

“I’m absolutely determined to stamp that out because I understand the value of that money really.”

Her background provides a solid foundation as she attempts to rebuild Labour’s economic policy in the ruins left by Jeremy Corbyn.

Dodds surely has one of the toughest gigs at Westminster, after the spendthrift Corbyn era destroyed what remained of Gordon Brown’s political legacy. Yet who better to entrust the national finances to than another Scot, the daughter of a bean-counter?

“Labour does need to build our perceived economic credibility, we know that’s a challenge,” the Oxford East MP admits. “It’s very important that people view Labour as really being effective custodians of the public purse … we need to demonstrate that we are capable, not just of adequately managing public money, but doing so very effectively.”

Last week Dodds attempted to make a clean break with the previous leadership in her most significant speech as shadow chancellor yet. She set out at the Mais Lecture a “sensible” and “responsible” vision for fiscal policy that marked a decisive shift in tone from the big spending promises and radical policies of the Corbyn-McDonnell era.

Shadow chancellor Anneliese Dodds at Labour Party headquarters in London, virtually delivers the annual Mais lecture to the City of London's Cass Business School - Stefan Rousseau /PA
Shadow chancellor Anneliese Dodds at Labour Party headquarters in London, virtually delivers the annual Mais lecture to the City of London's Cass Business School - Stefan Rousseau /PA

Absent from the speech were commitments to nationalise entire industries, overhaul the Bank of England’s remit and free broadband. In their place were promises for strict fiscal rules, a long-term transparent approach to decisions and a crackdown on spending wastage.

With the pandemic sending debt soaring to its highest level since the Sixties, how does Dodds see Labour policy developing in the new normal?

“Any economic policy is going to have to be different because it’s going to have to reflect that new reality and those new challenges,” she says.

'A sound footing'

“We need to have public finances on a sound footing. That’s really important, we know that the overall size of the debt actually increased substantially over the last 10 years of course and we haven’t seen long-term issues being dealt with, like, for example, a large number of people who are on pensions [and] the social care crisis.”

Dodds appears to be setting the stage for a more restrained economic policy. Labour needs “sensible” fiscal rules and “ones that enable us to deal with those longer term challenges”, she says. She has hinted at a rolling target that flexibly balances day-to-day spending with investment allowed in a low interest rate environment and a “fiscal anchor” to limit expenditure in a crisis.

Anneliese Dodds CV
Anneliese Dodds CV

The shadow chancellor also backs away from major reform of the Bank of England’s remit as repeatedly touted by John McDonnell, underlining the importance of the inflation target and need for independence. Even nationalisations, the flagship economic policy of Corbyn’s Labour, are now not spoken of with the same enthusiasm.

She highlights the need for change in the rail and energy industries and is supportive of recent state interventions in the former but says long-term policy still needs to be decided by the party.

“We’ve gone through a variety of different iterations of types of organisation of network industries. I think that actually we need to look at the reality right now and the future that we want for our country.”

Policy wonk

Anneliese Dodds, pictured at Edinburgh's empty arts venue Summerhall, accuses Rishi Sunak of creating a 'false choice' between health and the economy - Jane Barlow/PA
Anneliese Dodds, pictured at Edinburgh's empty arts venue Summerhall, accuses Rishi Sunak of creating a 'false choice' between health and the economy - Jane Barlow/PA

Like her opposite number Rishi Sunak, Dodds has only recently risen from relative obscurity to the top economic role in her party. Dodds has a background more as a policy wonk than a trade union firebrand like predecessor McDonnell, starting her career in lecturing. After roles at King’s College London and Aston University, Dodds was elected an MEP in 2014 and then an MP in 2017, serving in a junior role in Corbyn’s shadow cabinet for three years.

Dodds was inspired to enter politics by her experience in early jobs working in a restaurant and on a farm.

“This was way back when there wasn’t any kind of a minimum wage at all and I think just feeling at that stage quite how difficult it was for some people to get on. People who were working hard,” she says.

She became shadow chancellor last April at a time when Britain was facing the biggest recession in 300 years and a huge policy challenge.

With the Tories borrowing more than any government in peacetime, it has perhaps been a difficult nine months to plot a distinct course for Labour’s fiscal policy – particularly against the most popular Chancellor in decades. But Dodds worries that Sunak is about to make a grave mistake by taking his foot off the gas too soon.

She warns an attempt by Sunak to begin shoring up public finances at the Budget in March “could be very damaging” to the economy amid reports the Treasury is mulling over a plan to stabilise debt with tax hikes.

“We saw some of that approach after the global financial crisis where there was a very speedy attempt to engage in consolidation and actually that did have quite a large impact on demand,” she says.

Budget 'must protect jobs and businesses'

The Chancellor will be walking a tightrope after the pandemic between lowering borrowing and supporting growth but is being urged by the likes of the International Monetary Fund to keep the spending taps on.

Dodds says the focus of the Budget has “got to be on protecting jobs and keeping businesses in operation”, calling on Sunak to take action even before March 3 and warning of damaging uncertainty for firms.

“It’s really important that the debate does actually focus right now, when we’re clearly still in the throes of the pandemic, on growing the pie.”

Dodds claims Sunak has attempted to make a “false choice” between the economy and health but her most stinging criticism harks back to her prudent roots again.

Economic support has been sent out at a rapid pace with borrowing expected to exceed £400bn but Dodds is concerned about the many billions of pounds likely to be wasted. The National Audit Office says billions could be lost in the loan guarantee schemes, some to fraud, while spending hawks argue many households and businesses that have not needed support have received it as others fell through the cracks.

“We haven’t seen targeting of quite a lot of that spending now. I think that’s been a major problem,” she says. “It’s been quite frustrating really because we’ve not seen changes in the scope of the support packages and a targeting of them.”

Dodds has called for a “relentless focus on value for public money” and an annual report on the effectiveness of public spending decisions. It is not difficult to see why Dodds is stressing the importance of running a tight ship on spending. Polling suggests the party’s individual policies in 2019 were popular but a majority believed they were not affordable and Labour still lags behind on trust with the economy.

Its election chances could be significantly boosted by closing the trust deficit with Dodds herself still well behind Sunak in preferred chancellor polls. Dodds wants to broaden the party’s appeal.

“We really need to demonstrate that what we’re proposing would help right across the country and regardless of where people sit in terms of their position in the economy … It’s really important that we demonstrate as a party that we are on the side of people and businesses.”

Persuading voters that Labour are prudent guardians of the public purse will be crucial but Dodds is taking only the first baby steps in closing a yawning trust gap.