The wonks’ verdicts are in for Labour’s budget. They’re not fans…
UK Tax revenue is due to grow to the highest ever recorded level in history as a proportion of GDP. By the end of the decade 38.2p of every single £1 will be paid to HMRC…
Adam Smith Institute Director of Research Maxwell Marlow says: “The tax rises in this Budget will actively hurt working people. An increase in Employers’ National Insurance Contributions, which is a tax on jobs, will suppress wages and job creation. The hike to Capital Gains Tax too will keep productivity and wages low. The Government needs to outline a radical plan to boost growth and wages. This Budget is not it.” Verdict: Bad.
The Institute of Economic Affairs’ Executive Director Tom Clougherty says “the government is putting an awful lot of faith in its ability to choose and deliver public sector capital projects that deliver meaningful economic benefits. Few outside Whitehall will share their optimism… Without a radical, reformist agenda – a focus on the fundamental causes of our economic malaise – this government faces the same fate as its immediate predecessors: getting stuck managing Britain’s relative decline, with no clear plan to break free of it.” Verdict: Bad.
TaxPayer’s Alliance Chief Executive John O’Connell hits out at Labour’s election campaign: “We were consistently told that there was no need for big tax hikes because of a focus on growth, so taxpayers will be disgusted by the whoops and cheers of Labour MPs celebrating the fact that Rachel Reeves has just condemned the country to a record high tax burden. If the government ever wants to regain the trust of taxpayers it will need to rapidly find a way to halt the growing tax burden.” Verdict: Bad.
Centre for Policy Studies’ Director Robert Colvile says: “By hammering the private sector, she has delivered a Budget which – as the Office for Budget Responsibility’s own figures show – will reduce business investment, trade and private sector activity, propping up the economy via higher state spending… The Budget also leaves Britain with staggeringly high – and historically unprecedented – levels of tax and spending, with growth forecasts well below the levels required to sustain even current levels of welfare spending, never mind meet the demands of an ageing population.” Verdict: Bad.
Policy Exchange’s Head of Political Economy James Vitali says: “This Budget tilts resources away from the wealth-creating parts of our economy towards the public sector. It will be the working people of the UK who will suffer in the form of lower wage growth and higher tax bills.” Verdict: Bad.
The Trussite Growth Commission says “the bottom line overall is that less growth will mean an even bigger black hole to be filled in due course.” Verdict: Bad.
Outgoing Institute for Fiscal Studies Director Paul Johnson says: “Looks like what is going on here is short term fiscal loosening is boosting growth immediately. But hindering growth later on. Those later year forecasts are disappointing.” The IFS also accuses Labour of breaking its manifesto promise: “Somebody will pay for the higher taxes – largely working people. The employer NICs rise will further increase the incentive for employers to switch to contracting with the self-employed.” Verdict: Bad.
Tory centrist think tank Onward’s director Seb Payne says: “Rachel Reeves has delivered Labour’s most traditional budget since the 1970s. It ramps up borrowing for a short sugar rush of growth before slumping. Unless there are serious plans for supply side reform – with planning and nuclear power at the top of the pile – this risks being a Budget for stagnation, with living standards heading into decline.” Verdict: Bad.
The OBR isn’t exactly optimistic either…
BONUS REACTION: Kemi and Jenrick, one of whom will be Tory leader in a matter of days, respond:
Badenoch: “Labour had 14 years in Opposition to think about what they should do with the economy and this is what we get: higher taxes, more borrowing, and lower growth. We Conservatives cannot afford to make the same mistake. We need to return to principles and spend our time out of Government building a plan that will rewire the state, bring down taxes and reward the risk-takers and the entrepreneurs who create jobs and fuel economic growth.”
Jenrick: “This budget completes the biggest heist in modern history. Labour promised not to raise taxes, but this £40bn tax hike amounts to a £1,400 bill for every household. The British public are right to be furious that they were brazenly lied to. Forget boom and bust. Rachel Reeves will go down in history as the Gloom-and-Bust Chancellor. Reeves and Starmer conned the public at the General Election and working people are now paying for it with higher taxes and lower growth.”
Verdict: Bad.
