Despite the best efforts of some of the political commentariat, the budget did not lead to a run on the pound, nor a meltdown of the markets. And, yesterday, the Bank of England have cut interest rates.
However, Labour’s first fiscal event in government in 15 years was not inconsequential – with Rachel Reeves announcing £40bn in additional taxes, and a loosening of the fiscal rules that will enable her to invest billions into the UK’s creaking infrastructure.
Some have suggested that this was a more ‘left-wing’ budget than expected, but the measures the Chancellor has taken surely need to be considered against the backdrop in which she is operating.
Some facts. Productivity and growth have been virtually stagnant for over a decade. Our railways, roads, and schools are falling apart. The NHS is no longer fit-for-purpose.
Brexit, the mismanaged Pandemic, war in Europe, and Liz Truss, all hit the UK economy badly. Indeed, of the G7 countries, only Germany has performed worse economically than Britain over the past 5 years.
Add to this the blatant political game-playing of Rishi Sunak and Jeremy Hunt in offering voters an unaffordable pre-election bribe in the form of an NI cut of 4P- costing the Treasury£20bn- and you can only conclude that Reeves’ first budget was inevitably going to be as bitter as it was sweet.
Much needed investment into public services, housing, and finally paying overdue and well-deserved compensation to the victims of the blood contamination and post office scandals can all be cheered. Less welcome is the increase to employers NI, Winter Fuel Allowance reform, the lifting of the cap on bus fares (which hits both young and ‘working’ people) and a penalty on working farmers.
Nevertheless, overall, I’d give our first female Chancellor a solid 8 out of 10 on her first outing. But government must invest its newfound cash wisely.
Here, there are signs that Labour may be falling into the trap of ‘Public Sector good, Private Sector bad’. Not only are businesses facing higher taxes, but minimum and living wage rates are rising, and there has been a slew of recommended changes to employment law legislation that will add further financial burden to companies.
Compare and contrast this to the no-strings-attached additional monies for train drivers and the NHS – without, seemingly, any demand of reforms in two sectors that desperately require a huge shake-up. That is a red flag for me.
As Reeves said, you cannot sort everything out in one budget. But if Labour’s warm words to business pre-election are not to be viewed with some scepticism from business leaders, then a more even-handed approach to the public/private sectors will be necessary in the future.
Finally, to calm the nerves of all those ‘patriots’ on here who threaten to leave the country they love every time they are asked to invest in UK plc through the tax system a reminder that – even after this budget – the UK is still a low-tax country by western -European standards.
TRUMP WINS
Disappointed but not surprised is my reaction to the Orange one’s return to the White House.
There will be much analysis of why he won, and how the Democrats lost in the coming weeks and months, and we started our reflections on the US election with our American correspondent Martin Liptrott here.
A more studied reflection from me on the result, and its possible consequences, next week, but some immediate thoughts. It is (still) the economy stupid. Identity politics matter. Immigration is a concern for people other than racists. And, it is challenging enough for progressive parties to win, without selecting a radically different candidate to offer the electorate as President – and giving her just 107 days to convince people that she is the right person for the job.
In the main though – incumbency governments have largely been trounced across the world in multiple elections this year – including here in the UK. The failure of the Democrats to offer ‘change’ was its greatest Achilles heel.
