The British economy is in a right old pickle. So you might think whoever has been Chancellor of the Exchequer these past 18 months should bear at least some of the responsibility. But not Rachel Reeves, hapless Chancellor of a ‘Not me, guv’ government, who insists she’s blameless.
In what was effectively the country’s first ever breakfast time party political broadcast yesterday she blamed everybody (Liz Truss, Donald Trump, Vladimir Putin, Boris Johnson) and everything (tariffs, global headwinds, borrowing costs) for the current plight of the economy – bar herself.
Culpability was liberally sprayed around in a cynical, transparent rolling of the pitch to avoid responsibility for yet another shed-load of tax rises at the end of the month.
It’s a sign of how divorced she is from reality that she thinks we’ll fall for her bluster and lies. Of course, she’s fooling nobody, not even her own Labour MPs, who are terrified at what her second Budget has in store for a party that’s already struggling to stay above 20 per cent in the polls.
As if to prove there were no depths of deceit to which she would not plummet, even Brexit was wheeled out as an excuse. She claimed it was undermining her economic strategy. Perhaps she didn’t know about Brexit when she unveiled her first Budget a year ago.
She certainly didn’t mention it then – not once – as a constraint on her ability to run the economy. Now she does. Strange.
Poor productivity is another of her culprits. But we’ve known about our flagging productivity growth for years. Many of us warned that the Office for Budget Responsibility forecasts on productivity were too rosy. The OBR has recognised that at last, hence the downgrade in its upcoming assumptions about productivity growth, which increases the fiscal black hole the Chancellor has to fill (this time one entirely of her own making).
It’s the Tories to blame, claims Reeves in her Shangri-La world of denial. And it’s true they left a poor legacy on productivity growth. But public sector productivity fell 0.7 per cent in the second quarter of this year – the steepest fall in three years. Is that still the fault of the Tories? Really?
Even Donald Trump is a culprit. She blamed his tariffs for the global headwinds the economy now faces, as if his obsession with tariffs was one of life’s great unknowns.
Rachel Reeves blamed everybody and everything for the current plight of the economy – bar herself
She blamed his tariffs for the global headwinds the economy now faces, as if his obsession with tariffs was one of life’s great unknowns
Yet he was already revelling in the sobriquet ‘Tariff Man’ and pulling ahead in the presidential election when she unveiled her first Budget last autumn. Maybe all that passed 11 Downing Street by at the time.
High borrowing costs are also constraining her plans, she complains. We are indeed paying a ton of money – over £100billion a year – in interest to service the national debt. But the cost of borrowing has risen under her watch and I don’t remember Labour in opposition ever telling the Tories to borrow less.
Indeed, quite the reverse. During the so-called austerity years of the Tory-Lib Dem Coalition and the pandemic under Johnson, Labour consistently urged the government to spend and borrow more.
And if she really thought we were borrowing too much, why did she borrow an extra £30billion in her first Budget – along with an extra £40billion in taxes which she had pledged not to levy in the election campaign?
That double whammy of more borrowing and higher taxes does more to explain her current plight than anybody or anything she blamed yesterday morning.
It knocked the stuffing out of the economy, undermining confidence among consumers and businesses alike.
Overall she’s going to spend £100billion a year more than the plans she inherited from the previous government.
Even her £70billion tax-and-borrow extravaganza last year is not enough to cover it. That, in a nutshell, is why she’s back rattling the tax collectors’ bowl for the second year running.
This is a mess entirely of her own making. If she wants to discover the identity of who is really to blame, she should look in the mirror.
Yet still she can’t stop spending. There will be more for the NHS, more welfare (no more talk of cuts), more to help households and industry with fuel bills, which have risen to among the highest in the world because of the government’s mad dash for net zero (the economics of the madhouse in action – force up electricity bills then raise taxes to subsidise them).
Despite the billions she’s already thrown at the NHS, waiting lists are down only a quarter of a million since the summer of 2024 and still stand at 7.36 million. Why? Because healthcare productivity is down 1.5 per cent on the year. So much for NHS reform. Reeves claims she also wants to reduce the national debt. But it’s rising, not falling – and will rise more in the year ahead. She promises to cut the cost of living – but that will hardly be helped by piling extra taxes on ordinary people and households. Yet that is where we’re heading.
There’s a £30billion black hole to fill, plus a new spending spree to finance. Since even more debt is out of the question – except at an extortionate cost of borrowing – that leaves only tax rises (given major cuts to spending have also been ruled out).
The scale of increased tax required can’t be met by a myriad of small tax rises. So that manifesto promise not to raise any of the big revenue raisers – income tax, VAT, national insurance – will have to be junked.
After last year’s tax-raising Budget – itself a betrayal of manifesto promises – Reeves pledged not to return for further big tax rises in future Budgets. It had been, she averred, a one off. That second pledge will be broken in three weeks’ time, replaced by her new mantra: ‘We will all have to contribute.’
Income tax thresholds, first frozen under the Tories, will be frozen for another two years. The basic and higher rates of income tax might also be raised by 2p.
Together that could raise an extra £25billion a year, which would go some way – if not the whole way – to meeting her need for extra revenues. Some variation of that double whammy is what we’re now in for.
Brace yourselves. You’re about to be clobbered. Low-paid and part-time workers will find themselves paying the basic rate of tax for the first time. Middle-income earners will be dragged into a higher rate of income tax originally designed for only big earners.
Every striver in the land will be penalised. That’s the price the ‘working people’ Labour claims it was elected to protect will pay for the Chancellor’s economic ineptitude.
Yet, yesterday, Reeves still had the temerity – indeed the effrontery – to claim, several times, that she’d ‘fixed the foundations of the economy’. If that was really the case she wouldn’t be coming back for another big increase in a tax burden which is already at record levels.
Her claim, of course, is risible. Unemployment is rising and could go over 5 per cent next year. Inflation is the highest in the G7 group of major market economies, twice the official target at almost 4 per cent.
Growth is faltering (and is barely above 1 per cent anyway). Our national debt is rising faster than any equivalent economy. Living standards are static. Public sector productivity has been close to stagnant since Reeves took the economic helm.
If that’s fixing the foundations, the Chancellor must have used a cowboy builder.
No doubt without the proper licences.
