‘Better off with Labour’? Fiscal policy, electoral strategy, and the road to John Smith’s Shadow Budget, 1979-1992

On 16 March 1992, Labour’s Shadow Chancellor John Smith arrived at the Institute of Civil Engineers in Westminster for a piece of political theatre that would pass into legend. In front of an audience of journalists and businessmen, Smith delivered a ‘Shadow Budget’ speech setting out the tax and spending plans Labour would pursue if it won the forthcoming election – an innovative gambit designed to counter Conservative accusations that the party would hit voters with a £1,250 ‘tax bombshell’. At the end of the speech, Smith crossed Great George Street and posed on the steps of the Treasury with mock budget documents, including a distributional analysis which showed that eight out of ten taxpayers (and every employee earning less than £22,000) would either be better off or pay the same amount of tax under Labour. At the time, Labour strategists thought the initiative was ‘a great success’, but when John Major was re-elected on 9 April this judgment was quickly reversed, and it became conventional wisdom ‘that John Smith’s shadow Budget cost Labour the election’. Shaun Woodward, the Conservatives’ director of communications, believed that the speech backfired because it ‘served to rekindle public concern about just who would be paying Labour’s extra taxes’ and so reinforced the Tories’ argument that ‘You Can’t Trust Labour’