The natural reaction of most people to Rachel Reeves’s reported decision to abandon plans to raise income tax the Budget will be relief. After all, few relish having to hand over even more of their pay packet to the government.
But before anyone gets the bunting out it is worth pausing to consider the implications of her latest apparent change of heart. With the public finances in their current state, it means that the likelihood of a rise in income tax has been replaced by the certainty of other, as yet, unknown tax rises.
‘The sad reality is that confidence in Rachel Reeves and the prime minister is so low that few will be sure that ten days after that she won’t tear up her own Budget’ (PA Wire)
The temporary sense of relief will rapidly be replaced by sheer disbelief at the shambolic way the government is going about preparing for the Budget on 26 November.
Remember that just ten days ago Ms Reeves abandoned the customary “purdah” in the run up to Budget Day whereby chancellors keep their plans secret until the last minute to avoid disrupting the markets.
She called the TV cameras into 11 Downing Street on 4 November and gave the clearest possible signal that she intended to break Labour’s election pledge not to raise the basic rate of tax. It was an unprecedented and extraordinary piece of pre-Budget theatre and an attempt to “roll the lawn” for the widely expected and effectively confirmed plans to raise the basic and higher income tax rates.
Now we learn she has changed her mind because of the public “backlash” to it. Just after 11pm last night the FT’s George Parker, Anna Gross and Sam Fleming, citing two officials, reported that the chancellor had “ripped up” those plans entirely.
It begs the questions: who is running this government? A chancellor hamstrung by the influence of stronger voices is clearly and hopelessly out of their depth. Yet that is precisely what we are led to believe has happened — Bloomberg’s Alex Wickham reported that the chancellor had found herself “unable to make final decisions” on what policies to announce because of “Cabinet arguments”.
That she has apparently caved to “political pressure” either from stronger voices in the cabinet or, just as likely, the increasingly mutinous backbenches of the Labour party says it all.
Sir Keir Starmer won the election on a pledge to restore political stability after the chaos of the Johnson and Truss years. It has a significant majority and a mandate to make bold and difficult choices. For her part Reeves promised to restore financial stability. Instead we have had weakness, U-turns and mounting chaos. If this is political stability, I’m a lemming.
The reality is that Reeves’s endless mixed messages and chopping and changing have left her – and the government’s – political and financial credibility in tatters.
Any notion of stability in 10 Downing Street has been shot to pieces in recent days with the scandal of poisonous briefings against Health Secretary Wes Streeting, the latest dysfunctional soap opera drama involving Starmer’s senior backroom team.
What did Reeves expect when she indicated she planned to be the first chancellor in half a century to raise the basic tax rate? Crowds cheering her name in the streets? Ditching it will do little to enhance her standing. What is she doing giving a No 11 speech and then rowing back on that a week later? It’s unfathomable.
The government abolished winter fuel payments for the elderly – then reversed it. It said it would save billions by reforming welfare benefits – then reversed it.
While promising economic growth, Reeves snuffed out any prospect of it in her first budget by raising employers national insurance.
Her latest somersault, announcing a tax rise only to scrap it less than a fortnight later, is more akin to farce than tragedy. As one backbencher texted Politico late last night, Reeves and Starmer “have been warning MPs that the gilt markets are watching us like hawks, so we better be sensible … And now we read they’re dropping their biggest revenue-raising measure from the budget with two weeks to go in what will look like a panicked response to their briefing wars debacle. You can’t make this up.”
In another 12 days from here we will at last find out precisely what tax rises Reeves intends to impose on us. The sad reality is that confidence in her and the prime minister is so low that few will be sure that ten days after that she won’t tear up her own Budget. This is a government adrift. It is no way to run a country.
