The Chancellor will go for broke in her Budget.
Chancellor Rachel Reeves will cross a line Labour’s Gordon Brown didn”t dare (Image: Getty)
Rachel Reeves is a desperate woman. We saw it written all over her face in that bizarre pre-Budget meeting on Tuesday. She’s going to hike taxes by anywhere between £30billion and £50billion in her upcoming Budget and is bracing herself for the mother of all backlashes. Trust me, she’s going to get it.
Reeves is about to assault taxpayers on almost every imaginable front. She’ll pretend it’s not her fault, that she doesn’t want to do it. But if that were true, she’d be looking to cut state spending instead, and she won’t. The truth is, the Labour Party will secretly love this Budget. As I wrote yesterday, she’s going to do something left-wing MPs and activists have dreamed of for 50 years.
First, the Chancellor looks set to hit pensioners by slashing the popular Cash ISA allowance from £20,000 to either £4,000, £10,000 or £12,000 – the figure changes every week. It’s a purely punitive measure.
She may also target the hugely popular 25% tax-free pension cash lump sum. Inheritances could be next, along with raids on property. Pensioners are fair game because they don’t vote for Labour. Almost everyone will be clobbered apart from Labour’s key client groups – public sector workers and benefit claimants.
This is exactly what we expect from a Labour chancellor.
Rachel Reeves‘s political hero is New Labour chancellor Gordon Brown. She’s now following the same path he did.
Brown inherited a booming economy in 1997 and left a smouldering wreck by 2010. It’s what Labour chancellors do. It’s what Reeves will do.
The main difference is that, for a while, Brown kept tax and spending under control. He stuck to Tory spending pledges for the first two years, during which the economy boomed and public spending fell as a share of GDP.
It couldn’t last. Once those two years were up, he threw money at client Labour groups. In 1999, state spending was 33.9% of GDP. Thanks to the Brown splurge, it rocketed to 40.96% by 2008.
When the financial crisis hit, the cupboard was bare. By 2010, the state was swallowing 44.71% of everything Britain earned and voters had seen enough of Brown.
Brown was a disaster, but there was one thing even he didn’t dare do. Now Reeves is about to go there.
During the 1997 election, Brown pledged not to raise the basic or higher rates of income tax. It may seem incredible in the era of Keir Starmer, but he actually stuck to his promise.
Brown even cut the basic rate from 23% to 22% from April 2000 and introduced a 10% starting rate. In 2007, he cut the basic rate again to today’s 20%. Eventually, he blew his popularity by abolishing the 10p starting rate in 2008, sparking fury among lower earners.
By contrast, Reeves looks set to trash a Labour tax pledge just 18 months after winning power, by hiking income tax by 2p in the pound.
In doing so, she’ll cross a line no Labour chancellor has touched since Denis Healey. Gordon Brown did some terrible things, but even he didn’t do that. Reeves is about to dive in – and betrayed voters will never forgive her.
