What an inspiring moment.
After Rachel Reeves’s dispatch box performance, every little girl in Britain can grow up knowing that she too could one day break her manifesto promises, hike taxes on working people, and hostage her political future to some very dodgy gambles on growth, public services, and living standards. I’m sure Comrade Ellen would be very proud. The rest of us can be rightly appalled.
Not at Reeves making a smidgen of history, but because this Budget was proof – if any ConservativeHome reader ever needed it – that even the worst Conservative government is always better than a Labour one. Tories proved ineffectual against Britain’s stagnation. But this Budget positively embraced it, and set a very grim tone for the next five years.
Reeves claims to be from a changed Labour Party. But after a fourteen-year wait, today’s package was still exactly what one would expect if you asked Chat GPT to generate a Labour Budget. Fiscal rules fiddled to enable a borrowing splurge. Tax hikes on employers to prop up their union allies. And more cash shoveled into the NHS’s gaping maw, no deep reform required.
Standards have slipped enough since Sir Stafford Cripps that most readers could have checked Steve Swinford’s Twitter a couple of hours before Reeves got up and have found out most of what she announced. On tax, her two biggest surprises came from simply not doing two things – hiking fuel duty and extending the income tax threshold freeze – we had come to expect her to.
The Chancellor announced that taxes would rise by £40 billion – the second highest rise on record – and that the bulk of this would come from an increase in employers’ national insurance contributions from April, worth £25 billion. Non-dom status is to end. VAT will go on private school fees. The lower rate of capital gains tax will rise. Inheritance tax and stamp duty are squeezed.
All the pre-briefing aimed to reassure the Gods of the Copybook Headings. The markets remained quiescent whilst Reeves spoke. But, as I write, some form of reaction is already in progress. Labour looks set to borrow £140 billion more over this Parliament than expected. Like Kwasi Kwarteng two years ago, Reeves is making a few heroic assumptions about how that pays off.
The Office for Budget Responsibility expects gilt yields to be 0.25 of a point higher because of this Budget. Its opinion overall is rather damning. The national insurance hike is expected to both reduce wages and result in fewer low-paid jobs. After an initial flurry based on the Chancellor’s short-term spending bonanza, growth in the second half of this Parliament looks set to decline.
Reeves’s hikes will together take tax as a share of GDP to 38.2 per cent – higher than at any other point for which comparable figures are known. Reeves pleaded that this was down to that nefarious blackhole. But the OBR struggled to evidence that it existed. Still, at least Ed Miliband gets his various boondoggles. Compared to Reeves, his broken promises look like small beer.
Since so much of this Budget was already in the public domain, writing a response to it would have been quite easy for either of the leadership candidates. But the length of our contest finally paid off by providing Rishi Sunak with a final parliamentary hurrah. When I said that he would be vindicated over his warnings about Labour’s tax bombshell, I didn’t know it would be so quickly.
Having amiably meandered through PMQs, Sunak gave both barrels on his successor-but-three at Number 11. He condemned Keir Starmer for broken promises and empty rhetoric. He lamented the negative environment Labour’s hikes would create for businesses. And the Tory benches roared as he went through every tax Reeves had chosen to raise. More, more!
Amongst sections of our party, Sunak has long since been written off as a conservative-in-name-only – the Santa Monica socialist whose political legacy comprises self-defeating tax rises, an electorate hooked on statism, and an election defeat brought about by his studious commitment to convention. But in the battle between Nigel Lawson and Ellen Wilkinson, the former wins out.
Yet even if today’s package provides a heady opportunity for all of us on the Right to say “I told you so”, that brief fillip with soon wear off, and the harsh reality of five years of hard Labour will sink in. Our next leader will find it as easy as Sunak to point out Reeves’s follies. But we are in no position to change anything, as this government takes the same grim course as its predecessors.
We know the causes of our national stagnation, yet we failed to address them adequately in fourteen years. We cannot condemn Labour for houses or power stations we did not build. If they are hooked on human quantitative easing, we blazed the trail. We have continually lamented the Labour inheritance, failed to challenge it, and have now given Labour a chance to extend it.
This proves the point that we made explicitly, and Sunak made implicitly, at this summer’s election. Vote Conservative. Because as empty as our promises prove, as incompetent our ministers, and as underwhelming our achievements, the other lot are even worse. Reeves set about attempting to prove that today. That is a cost we have to bear, along with every other taxpayer.
