Opinion: I fear there is worse to come after Reeves' cruel Budget

By ALEX BRUMMER, CITY EDITOR

Published: | Updated:

Be in no doubt: Rachel Reeves ’ second Budget, which will tax the so-called ‘working people’ of this country until the pips squeak, is condemning us all to an ever-accelerating economic doom loop. At a stroke, I fear she has destroyed any chance of growth in this country for a generation or longer – and will be forced to raise taxes again before long. As a direct result of her decisions, growth will shrink even further next year. Lower growth will mean less revenue to the government and larger payouts to Britain’s swelling populations of the unemployed and the simply idle.

Be in no doubt: Rachel Reeves ’ second Budget, which will tax the so-called ‘working people’ of this country until the pips squeak, is condemning us all to an ever-accelerating economic doom loop. At a stroke, I fear she has destroyed any chance of growth in this country for a generation or longer – and will be forced to raise taxes again before long. As a direct result of her decisions, growth will shrink even further next year. Lower growth will mean less revenue to the government and larger payouts to Britain’s swelling populations of the unemployed and the simply idle.

This borrowing and debt splurge could not have come at a worse time. As this paper has consistently warned, concerns about an AI bubble are sending shudders through New York’s Nasdaq tech market, causing immense volatility. Fears of a momentous crash in shares in AI companies have already led some of the world’s shrewdest investors to sell their frothy tech stocks and cryptocurrency holdings for cash and the ultimate safe haven: gold. Today, the shocking release of the Office for Budget Responsibility’s (OBR) report on Reeves’ unappetising measures caused a moment of mayhem in the bond markets, even before she rose to her feet.

This borrowing and debt splurge could not have come at a worse time. As this paper has consistently warned, concerns about an AI bubble are sending shudders through New York’s Nasdaq tech market, causing immense volatility. Fears of a momentous crash in shares in AI companies have already led some of the world’s shrewdest investors to sell their frothy tech stocks and cryptocurrency holdings for cash and the ultimate safe haven: gold. Today, the shocking release of the Office for Budget Responsibility’s (OBR) report on Reeves’ unappetising measures caused a moment of mayhem in the bond markets, even before she rose to her feet.

The only realistic way to escape this abysmal future of ever-rising taxes and subservience to unstable bond markets is to slash public spending. But Labour ’s backbenchers are too ignorant and inexperienced to countenance such a thing. Before last year’s general election , the Chancellor and her equally hapless boss, Keir Starmer , promised the country that they would not be raising taxes beyond the £8.5billion in their manifesto. Within weeks of taking office, however, she almost immediately hiked taxes by more than any previous Chancellor by a full £40billion – while vowing that she ‘wouldn’t be back for more’.

The only realistic way to escape this abysmal future of ever-rising taxes and subservience to unstable bond markets is to slash public spending. But Labour ’s backbenchers are too ignorant and inexperienced to countenance such a thing. Before last year’s general election , the Chancellor and her equally hapless boss, Keir Starmer , promised the country that they would not be raising taxes beyond the £8.5billion in their manifesto. Within weeks of taking office, however, she almost immediately hiked taxes by more than any previous Chancellor by a full £40billion – while vowing that she ‘wouldn’t be back for more’.

Now, in a shockingly brazen breach of trust, she is once again plundering our pockets for an extra £26billion by 2029-2030, with no fewer than 88 separate tax-raising or spending measures. This is the largest tax burden in the history of our country – even worse than during wartime. The vast majority of it is being taken from people working hard in the private sector – to lavish on an ever-ballooning welfare bill. As many as 780,000 individuals, including plenty of low-paid and swathes of middle earners as well as pensioners, will be shelling out more to the taxman to splurge on this benefits bonanza.

Now, in a shockingly brazen breach of trust, she is once again plundering our pockets for an extra £26billion by 2029-2030, with no fewer than 88 separate tax-raising or spending measures. This is the largest tax burden in the history of our country – even worse than during wartime. The vast majority of it is being taken from people working hard in the private sector – to lavish on an ever-ballooning welfare bill. As many as 780,000 individuals, including plenty of low-paid and swathes of middle earners as well as pensioners, will be shelling out more to the taxman to splurge on this benefits bonanza.

The Chancellor pledged in her long Budget build-up that those with the ‘broadest shoulders’ would bear the cost of Labour’s fiscal incontinence. That is despite the fact that the top ten per cent of taxpayers in Britain already pay 60 per cent of the nation’s tax. Analysis by the OECD think-tank shows that, staggeringly, nearly half of upper-rate taxpayers hand over fully 46 per cent of their income in levies to the Government – the highest in the G7. Despite this punitive war on success, Reeves’ dogmatic attack on better-off Britons is only just getting started.

The Chancellor pledged in her long Budget build-up that those with the ‘broadest shoulders’ would bear the cost of Labour’s fiscal incontinence. That is despite the fact that the top ten per cent of taxpayers in Britain already pay 60 per cent of the nation’s tax. Analysis by the OECD think-tank shows that, staggeringly, nearly half of upper-rate taxpayers hand over fully 46 per cent of their income in levies to the Government – the highest in the G7. Despite this punitive war on success, Reeves’ dogmatic attack on better-off Britons is only just getting started.

Last year she punished families with children in private schools, non-domiciled residents, private equity barons and others. In so doing she helped to drive some 257,000 people overseas – including UK-trained medics, cyber experts, entrepreneurs and thousands of ambitious young people. Yesterday, the Chancellor, who lives rent-free in Downing Street, targeted landlords – she happens to be one, albeit one who is flaky on her legal requirements – and homeowners living in expensive properties. Her £2,500 annual surcharge on homes worth £2million, ratcheting to a hefty £7,500 to those living in houses worth more than £5million, trashes the Thatcherite dream of a house-owning democracy. It will also cost a fortune to implement and all to raise a relatively paltry £400million.

Last year she punished families with children in private schools, non-domiciled residents, private equity barons and others. In so doing she helped to drive some 257,000 people overseas – including UK-trained medics, cyber experts, entrepreneurs and thousands of ambitious young people. Yesterday, the Chancellor, who lives rent-free in Downing Street, targeted landlords – she happens to be one, albeit one who is flaky on her legal requirements – and homeowners living in expensive properties. Her £2,500 annual surcharge on homes worth £2million, ratcheting to a hefty £7,500 to those living in houses worth more than £5million, trashes the Thatcherite dream of a house-owning democracy. It will also cost a fortune to implement and all to raise a relatively paltry £400million.

Punishing mansion-owners will delight Labour’s baying backbenchers. But just like last year’s blitz on wealth, in the shape of higher inheritance and capital gains taxes, it represents another penalty on aspiration which will drive ever more of the nation’s strivers offshore. ‘Labour’ is meant to be the party of work. But unemployment rates have soared under this government from 4.1 per cent of the workforce to 5 per cent. The higher the jobless rate, of course, the bigger the nation’s benefits bill – and the less tax collected. So Rachel Reeves will inevitably be back for more this time next year.

Punishing mansion-owners will delight Labour’s baying backbenchers. But just like last year’s blitz on wealth, in the shape of higher inheritance and capital gains taxes, it represents another penalty on aspiration which will drive ever more of the nation’s strivers offshore. ‘Labour’ is meant to be the party of work. But unemployment rates have soared under this government from 4.1 per cent of the workforce to 5 per cent. The higher the jobless rate, of course, the bigger the nation’s benefits bill – and the less tax collected. So Rachel Reeves will inevitably be back for more this time next year.

The markets no longer trust the Government to manage the public finances. That means that the interest on our national debt has soared compared to other countries. Government debt, despite the Chancellor’s desperate claims to the contrary, continues its unsustainable upward path. Even on the most optimistic assumptions, it will rise to 96 per cent of total output according to the OBR’s figures – 2 per cent higher than projected as recently as March’s spring statement. For comparison, this is twice the average of all advanced economies and explains why the nation’s interest rate bill will rocket from an eye-watering £114billion in this financial year to £140billion by 2029-30.

The markets no longer trust the Government to manage the public finances. That means that the interest on our national debt has soared compared to other countries. Government debt, despite the Chancellor’s desperate claims to the contrary, continues its unsustainable upward path. Even on the most optimistic assumptions, it will rise to 96 per cent of total output according to the OBR’s figures – 2 per cent higher than projected as recently as March’s spring statement. For comparison, this is twice the average of all advanced economies and explains why the nation’s interest rate bill will rocket from an eye-watering £114billion in this financial year to £140billion by 2029-30.

Reeves made much in her speech of bringing down the cost of living. Yet inflation, stuck at 3.5 per cent in the current financial year according to the OBR, is way above the Bank of England’s two per cent target and again the highest among the G7. Despite her desperate attempts to blame everyone else for it, sticky inflation is largely the result of her own policies – most notably the rise in employers’ national insurance contributions last year. After this Budget, prescription charges will be capped at under £10 and rail fares frozen for the first time in three decades. She is also bearing down on energy costs by removing some green levies on fuel bills.

Reeves made much in her speech of bringing down the cost of living. Yet inflation, stuck at 3.5 per cent in the current financial year according to the OBR, is way above the Bank of England’s two per cent target and again the highest among the G7. Despite her desperate attempts to blame everyone else for it, sticky inflation is largely the result of her own policies – most notably the rise in employers’ national insurance contributions last year. After this Budget, prescription charges will be capped at under £10 and rail fares frozen for the first time in three decades. She is also bearing down on energy costs by removing some green levies on fuel bills.

As welcome these measure might be for households, there is no such thing as a free lunch in economics. Cheaper prescriptions will heap further pressure on the NHS, while the rail-fare freeze can only come at the cost of future investment in service levels. Then there is her naked attack on aspiration. Robbing the nation’s private pensions systems by withdrawing tax relief on salary-sacrifice schemes will pile on the cost of future welfare and state pensions over the long term – and will cost tens if not hundreds of thousands to young people squirrelling away whatever they can so they can be less of a burden on the state in old age. Meanwhile, the higher tax on share dividends will severely damage the attraction of share ownership and undermines any pretence of a growth agenda.

As welcome these measure might be for households, there is no such thing as a free lunch in economics. Cheaper prescriptions will heap further pressure on the NHS, while the rail-fare freeze can only come at the cost of future investment in service levels. Then there is her naked attack on aspiration. Robbing the nation’s private pensions systems by withdrawing tax relief on salary-sacrifice schemes will pile on the cost of future welfare and state pensions over the long term – and will cost tens if not hundreds of thousands to young people squirrelling away whatever they can so they can be less of a burden on the state in old age. Meanwhile, the higher tax on share dividends will severely damage the attraction of share ownership and undermines any pretence of a growth agenda.

Jeremy Corbyn, the bearded socialist who led the Labour Party between 2015 and 2020, was frequently accused of imagining he could pluck banknotes from a ‘magic money tree’. Now Reeves has found her own orchard of them. Overall, these are the most savage tax rises since Denis Healey went cap-in-hand to the International Monetary Fund (IMF) for a bail-out five decades ago. On that occasion, the IMF imposed draconian government spending cuts to restore Britain’s fiscal stability. The great fear – or perhaps it would be a blessing in disguise – must now be that Keir Starmer’s inept and doctrinaire regime could be bludgeoned by the financial markets into a similar humiliating reversal of this Budget’s cruel and unspeakable theft.

Jeremy Corbyn, the bearded socialist who led the Labour Party between 2015 and 2020, was frequently accused of imagining he could pluck banknotes from a ‘magic money tree’. Now Reeves has found her own orchard of them. Overall, these are the most savage tax rises since Denis Healey went cap-in-hand to the International Monetary Fund (IMF) for a bail-out five decades ago. On that occasion, the IMF imposed draconian government spending cuts to restore Britain’s fiscal stability. The great fear – or perhaps it would be a blessing in disguise – must now be that Keir Starmer’s inept and doctrinaire regime could be bludgeoned by the financial markets into a similar humiliating reversal of this Budget’s cruel and unspeakable theft.

Keir StarmerLabourRachel Reeves