Only roaring growth can save Reeves, and the country
The Chancellor had been speaking for about five minutes when it dawned on me that she wasn’t going to say anything interesting. By the time she got to discussing the finer points of Southport’s pier and Kirkcaldy’s high street, I’d moved on to other things.
That’s not to say that the Spending Review wasn’t interesting, or that it didn’t matter, it’s just that Rachel Reeves used her speech in the Commons to rattle off not much more than a loose collection of local press releases with no intention of getting into the details.
As Paul Johnson of the IFS said, “The Chancellor’s speech was full of numbers, few of them useful.” But the details, when they came, were interesting. The details mattered. As soon as Reeves sat down the Treasury published a tranche of documents, groaning with data, tables, multi-year spending plans and confirmation of where the axe will fall on those departments whose budgets are not protected.
One of the most ambitious elements of the government’s financial plans is the amount they expect to ‘save’ from efficiency measures; a cool £14bn a year by 2028-29. Scepticism over whether such sums can possibly be achieved is just one reason why nearly every economist now expects the government to launch another tax raid in the Autumn.
‘Substantial tax increases will be needed’
Consultants at Oxford Economics said yesterday’s announcement “leaves the impression of being a stopgap, rather than a durable plan” adding that “it looks increasingly likely that substantial tax increases will be needed in the Autumn Budget.”
Reeves used her speech yesterday to try and reassert her authority and cement her credibility after some bruising u-turns on welfare spending left her looking at the mercy of events – or Labour MPs. If she’s forced to launch a tax raid in October, or if she tries to fiddle the spending rules for the final year of this parliament as a way of avoiding tax rises, her credibility will be shot to pieces.
More importantly, the capacity of the UK economy to endure yet another increase to an already record-high tax burden will be tested to destruction. Only roaring economic growth can save her – and the country – from a nightmare scenario, and as things stand there’s little sign of that on the horizon.
It seems we must now endure another damaging few months of tax-related speculation thanks to a Chancellor whose decisions mean she’s unable to rule them out.