What on earth is the Chancellor playing at?
Chancellor Rachel Reeves is up to something odd, again (Image: Getty)
Rachel Reeves drove up taxes by another £26billion in last week’s disastrous Budget, on top of last year’s £40billion fiscal blitz. That bit was easy to spot. But there’s one move most people missed, apart from one or two economists. Which is completely understandable. Because she buried it.
Whilst the Chancellor made loud promises about scrapping the two‑child benefit cap to curry favour with Labour’s rebellious backbench MPs, she kept quiet about the consequences of her free-spending tenure at No 11. We only know what she’s done from technical reports published after she sat down.
As well as hiking taxes, Reeves will borrow even more money. Over the five years from 2025 to 2029, she’ll borrow a staggering £75billion more than the Office for Budget Responsibility predicted in March.
That’s a mighty increase over a short space of time. Every extra penny borrowed will go on the national debt and push up interest payments. She didn’t tell us that, and it’s not the only shocking thing she did
Most of these tax rises won’t come into force until 2028, meaning Reeves is effectively going on a spree with the nation’s credit card today, then recouping the cost by taxing us hard in the final year of the Parliament.
That is terrible politics. No chancellor, whether Tory or Labour, hikes taxes just before an election. It enrages voters and sets them up for electoral annihilation.
Perhaps Reeves hopes the economy will grow fast enough to scrap her tax hikes, but I can’t see that happening. Last week’s Budget will have a chilling effect on growth.
There’s something even weirder. Apparently, Reeves aims to bring the annual budget into surplus by 2030. That would be the first surplus from any UK chancellor since 2000/01, a quarter of a century ago.
Are we really supposed to believe she will do that? Rachel Reeves, of all the people?
Given her free-spending track record so far, it’s impossible to believe she’ll suddenly turn into a fiscal hawk. And of course she won’t. Labour MPs won’t let her.
So here’s the trick. The next election must be held no later than August 15, 2029. That means any surplus target is set for a time when Labour is very unlikely to be in power.
The odds on Reeves being Chancellor then are next to nil. In fact, she’ll do well to last the week, as calls for her to resign grow.
Effectively, she’s promised a budget surplus but left the hard task of generating it surplus to somebody else. Who almost certainly won’t achieve it either.
I’ve reached two conclusions. First, she’s pledged tax hikes and budget surpluses purely to meet the OBR’s rules, with no intention of sticking to the plan. Given her track record of dishonesty, that’s a racing certainty.
Second, Reeves doesn’t expect to be around to deal with the fallout. She’ll leave the mess for her successor, confident it won’t be her problem. That’s a pattern UK chancellors have followed for 25 years.
Reeves doesn’t care what happens further down the line, she just wants to take the easy option today. Basically she’s given up. Whoever follows will have an even bigger mess to clean up. And I’m not sure she’ll even care.
