Yesterday, chancellor Rachel Reeves swore she was “not going to come back for more” tax after last month’s brutal Budget. Her pledge is already in tatters.
Labour seems to determined to die fighting economic growth (Image: Getty)
It’s a “read my lips” moment. Reeves says one thing, so we must assume the opposite will happen.
During the election, Reeves and PM Keir Starmer swore blind they wouldn’t hike national insurance (NI) on “working people”.
Then on October 30, Reeves slapped £25billion worth of NI on employers, while denying she’d broken her promise.
Yet the Office for Budget Responsibility calculates employers will pass 60% of the cost onto “working people” immediately, rising to 76% in the medium term.
They will do this by cutting wage growth, hiking prices and laying off staff. Deutsche Bank says 100,000 jobs will go thanks to Reeves.
The chancellor isn’t the most reliable witness to her own actions – as her CV shenanigans have shown – so we have to treat her every word with scepticism.
Even her fellow cabinet minister, business secretary Jonathan Reynolds, refused to back her tax pledge. Today he suggested there will be more tax hikes this Parliament but they won’t be “comparable”.
Economists were totally dismissive, warning Labour’s next bombshell tax raid will explode in April. That’s less than five months away.
For the record, Reeves told the Confederation of British Industry (CBI) conference yesterday: “Public services now need to live within their means because I’m really clear, I’m not coming back with more borrowing or more taxes.”
She’s “really clear”, apparently.
Andrew Goodwin, chief UK economist at Oxford Economics, is equally clear that she will.
He said “the UK’s debt dynamics are among the worst of the advanced economies” and the Budget will make them even worse.
It will drive inflation back above 3% next year forcing the Bank of England to keep interest rates higher as a result.
That will add billions more to our debt servicing costs, which are already at an all-time high.
With the economy shrinking under Labour, Goodwin said the “chancellor will come under pressure to implement further tax hikes”.
Particularly if we get an unforeseen economic shock. We’re now borrowed to the max and it won’t take much to knock the economy of course.
Goodwin said the crunch could come as soon as April, doing the spring spending review.
Reeves can’t blame the Tories this time. This is all her own work.
Business confidence and investment have collapsed since she took charge.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the first survey on the health of the economy after the Budget “makes for gloomy reading”.
“Businesses have reported falling output for the first time in just over a year while employment has now been cut for two consecutive months.”
Latest CBI data shows business sentiment is nowfalling at the fastest pace in two years.
Investors are giving up. Salman Amin, the head of Pladis, a major investor in the UK, said, “it’s becoming harder to understand what the case for investment is.”
More than 80 British chief executives wrote to Reeves last week warning that they faced £7billion in increased costs, making job losses and price rises inevitable.
John Lewis chief executive has accused Reeves of launching a “two-handed” tax grab on retailers.
She’s launched a two-handed tax grab on all of us. In doing so, she’s destroyed growth AND tax receipts. That means she’ll be back for more in April.
Whatever she “promised” yesterday.
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