This was the worst Budget I have ever heard a British Chancellor deliver, by an enormous margin. It is a catastrophe with no redeeming features, a milestone in our decline and fall, an attempt to gaslight the public by a Government that has broken all of its promises.
Socialism, class warfare, a contempt for private property, the belief that quangocrats, not entrepreneurs, are the fount of prosperity: the old Left-wing mind virus has reinfected the Labour party, and the consequences will be lethal.
Rachel Reeves’s Budget will savage the economy, trash growth, increase the national debt, impoverish millions of “working people”, launch a historic war on wealth-creators, savers, investors, family businesses and farmers, and consign this country to irrelevance.
I almost miss Gordon Brown: he was a disaster, but strikingly intelligent and had read the great economists. Brown cut capital gains tax; Reeves is increasing it again. Brown cheered on the private sector and the City, if only as milchcows; Reeves is happy to chase away millionaires.
The Starmer-Reeves-Miliband philosophy, in as much as it exists, is just as much a repudiation of the New Labour Blair-Brown interlude as it of Thatcherism.
The current lot are unashamedly collectivist. They love the state and are baffled by free-markets. They support a new Gosplan, spearheaded by a cadre of woke apparatchiks, tasked with driving “investment”, “growth”, “decarbonisation”, “delivery” and, laughably, “value for money”.
They are oblivious to the possibility of “roads to nowhere”, of public sector waste, overspend and “white elephants” (a la HS2). They don’t realise that top-down misallocation of resources means that state “investment” can reduce growth by diverting scarce funds.
They don’t believe in genuine NHS and public sector reform. Their approach to taxation is to extract as much cash as possible from the private sector, while protecting their public sector friends. They believe that extortionate taxes are moral, and that private schools and landlords are not.
They are Fabians, gradualist socialists, rather than outright Corbyn-style revolutionaries, but only faute de mieux: they believe Miliband was defeated in part because he supported a vicious wealth tax on expensive homes, a policy they are too scared to support.
Reeves’s extension of inheritance tax testifies to the grip of Marxian ideology on this Government. Their blatant lies during the run-up to the election will eventually cost them dear, however. Labour claimed that its manifesto was fully-costed, that it had no plans for additional tax rises (on top of those already announced, such as the disgusting raid on private schools), that it would not put up national insurance, and then proceeded to do the exact opposite, to the tune of £41.2 billion a year.
The Tories were mercilessly mocked when they claimed that Labour would raise taxes by £2,000, yet Rishi Sunak stands vindicated: Reeves’s final bill is even higher at £2,342 per year per family of four. The rise in employers’ national insurance will be borne overwhelmingly by employees via reduced pay rises, and Reeves’s decision to lower the threshold at which that dreadful tax bites means the lowest paid will be punished especially severely.
We are witnessing the final death throes of a forty year old dream, of the idea of Britain as a mid-point between the US and European economic models, as a free-market, free-trading entrepot economy with a medium-sized welfare state. Tax rates would be set to maximise growth, we would embrace privatisation, deregulation, and the “Wimbledonisation” of our economy, and we would aim for US levels of tax and spend and, thanks to clever reforms, to public services of European quality.
It worked for 25 years; even Tony Blair’s Third Way broadly accepted this model. Brexit was the last attempt to revive this, at least in the version envisaged by free-market Eurosceptics. Yet under Labour, the aim appears to be to outspend and out-tax as many European nations as possible, and damn the consequences.
Tax as a share of GDP will rise from 36.4 per cent this year to a record high of 38.2 per cent in 2029-30, ahead of the G7 average and 5.1 percentage points higher than before Covid. The tax burden had fallen to a smidgen over 28 per cent in the 1990s – by today’s standards, we were a fiscal paradise – as a result of the Thatcherite revolution, which has now been almost entirely undone. Public spending fell to only a little above 34 per cent of GDP at the peak of Thatcherite influence; under Reeves, it will surge from 44.9 per cent last year to 45.3 per cent this year, before dipping to 44.5 per cent in 2029-30, 4.9 percentage points higher than pre-pandemic.
We have hardly reached the end of Hayek’s Road to Serfdom. Much of Reeves’s splurge will take place this year and next, driven by public sector pay rises. Real terms current spending growth will fall to just 1.3 per cent a year from 2025-26, a level the Left will decry as a return to austerity. The Chancellor will surely end up boosting spending again, and raising taxes again to pay for it.
It is simply not true that all, or even most, of the higher taxes were needed to fill a “black hole” bequeathed by the Tories. The £22 billion number is a disgraceful fiction that demeans Labour. The Office for Budget Responsibility (OBR) claims “the Treasury had information about £9.5 billion of net pressures on departments’ budgets in 2024-25 which it did not share with us”, but not all of this would have ended up categorised as extra spending.
The only certainty, it seems, is that the OBR would have dropped a £2.9 billion underspend assumed in its forecast. Jeremy Hunt’s numbers might have been a few billion pounds too optimistic, but I see no evidence it would have made an iota’s difference to the big picture.
Reeves is putting up taxes out of choice, not necessity. She could have borrowed more for one-off costs such as infected blood compensation, and otherwise kept to Hunt’s spending plans. She needs to take responsibility. She is a Left-wing ideologue in our most socialist Government since that of James Callaghan in the 1970s. Barring a miracle, the game is up for Britain. DT.
