For me the most frightening moment in yesterday’s Budget nightmare came right at the start, when chancellor Rachel Reeves told us how fast the economy is set to grow. Or rather, how slowly.
She listed a series of GDP growth forecasts, prepared by the Office for Budget Responsibility (OBR), showing how fast the economy will grow after yesterday’s tax and borrowing splurge. Taxpayers are going to get a rotten return on their money.
This year, the UK economy is forecast to grow 1.1%. That’s pretty dismal.
It’s also a bit baffling. GDP actually grew by an 1.2% in the first half of the year, with the Office for National Stat istics claiming the UK was going “gangbusters”.
Yet full-year growth will shrink to just 1.1%? That suggests Labour has already sucked the life out of the economy, which is going to shrink from here.
Nice work.
In 2025, we can look forward to growth of 2% a year. And that’s as good as it gets.
Growth will retreat to 1.8% in 2026 and then 1.5% in both 2027 and 2028. In 2029, we’re still only looking at 1.6%. It’s nowhere near good enough.
Incredibly, Reeves repeatedly boasted that her Halloween Budget would drive growth. What growth, Chancellor?
Hitting us with an extra £40billion in taxes has crushed it. Around £25billion of that was targeted at businesses, which will respond by slashing jobs, wages and investment to recoup the cost.
Thanks to Reeves, the tax burden will hit a new historic high of 38% of national income.
On top of that, Reeves has fiddled the fiscal rules to borrow an extra £32billion a year. That will drive up interest costs and put the UK’s credit rating at risk.
That’s a massive worry as Reeves plans to borrow a total of £300billion from global bond investors in the year to March. Now we’ll pay billions more in interest for the privilege.
The state will swell to 44% of national income, five percentage points higher than before the pandemic.
Taxes of £40billion and borrowing of £32billion add up to £72billion. I’ve shown my workings in case anybody from the Treasury is reading, and needs help with their sums.
And what do we get in return? GDP growth of 1.5% in 2027, and the same in 2028.
By 2029, living standards will have fallen about 1% from today’s level. Oh, and all that extra spending will drive up inflation, too.
Rachel Reeves will spend like crazy but the growth won’t come (Image: Getty)
If growth is this bad then Reeves will have no choice but to tax more and borrow more (assuming anyone will lend to us).
Yesterday, she attacked former Tory PM Rishi Sunak and chancellor Jeremy Hunt with malice and spite.
She blamed them for every woe afflicting this country, as if they personally ordered the pandemic and Putin’s invasion of Ukraine, which triggered the energy shock and subsequent cost-of-living crisis.
Reeves will trigger a fresh world of woe if the economy doesn’t grow. The OBR has done its sums, and Labour’s Budget doesn’t add up at all. So why is she pretending it does?
