Chancellor Rachel Reeves delivered a budget overshadowed by the major lie that Labour would not raise National Insurance—a key manifesto promise. An increase of £25 billion in Employer National Insurance, alongside £15 billion in other tax rises, constitutes one of the largest hikes in history, pushing the total tax burden to an unprecedented level as a percentage of GDP. However, beneath this “big lie” lies a budget that is so pessimistic and unambitious that it risks long-term harm to the UK economy.
Firstly, she appears to believe she can take the public for fools by leveraging the term “working people.” While it is technically true that this burden is not directly imposed on salaried employees, the substantial increase will make it difficult for businesses to raise wages and hire new staff (with a small exemption for those employing fewer than five people on the national living wage). Even large businesses will be affected. These tax increases will ultimately be passed onto working people in the form of stagnant wages, as any potential salary increases will now have to be diverted into government coffers.
Much fanfare was made about the alleged £22 billion “black hole” left by the previous government, yet Labour has struggled to specify the exact causes of this deficit. While the previous Tory government’s record on economic and financial matters is dismal, Chancellor Reeves seems oblivious to the reasons why. Perhaps it stems from the additional £3 billion in “aid” just pledged to the Ukraine conflict, the lingering costs of the Covid lockdowns she still supports, or the mysterious and unrestrained Home Office Refugee Resettlement Scheme (essentially migrant hotels) set to rise to over £6 billion this year from £4.7 billion last year. In light of these spending priorities, cutting the winter fuel allowance for pensioners to save a mere £1.5 billion is nonsensical in terms of finance and just plain bad politics.
Despite working people facing the highest income tax burden in decades, the Chancellor has also chosen to keep tax thresholds frozen until at least 2028. This decision, coupled with the rising minimum wage, will mean that many working-class people will be paying more tax than ever.
If there is anything to commend in the budget, it is that the Chancellor has abolished the straight-jacket fiscal rules imposed by George Osborne in 2010 regarding borrowing for infrastructure investment. Modern economies depend on capital investment, both private and state, and restricting half of this equation contributed to 14 years of economic stagnation under the Conservatives, leaving roads, hospitals, and bridges in decay.
However, rather than pairing this new investment with an intelligent industrial strategy to rebuild our industrial sector and create skilled jobs, Labour has opted to squander the opportunity by investing in “green” fantasy projects, such as Carbon Capture (at £30 billion), and establishing UK Energy, a government company that will produce no power and back unreliable & unpopular onshore wind instead of safe & reliable nuclear energy.
At a time of geopolitical instability, rather than supporting our oil and gas sector, Ed Miliband is set on dismantling it, costing tens of thousands of high-paying jobs in Scotland and across the UK. A plan to address the UK’s steel crisis was also entirely absent, meaning that, with the recent tragic closure of Port Talbot, Britain will remain the only major economy unable to produce virgin steel.
The elephant in the room—immigration—went wholly unmentioned. The ineffective Office for Budget Responsibility bases financial forecasts on current trends, meaning it is likely that net migration will remain at an unsustainable >600,000 per year to fund Reeves’s illusory recovery. There is no plan to eliminate our perceived reliance on immigration or to equip young people with the skills needed to halt further decline in our industrial and manufacturing sectors.
Alongside this, she has proposed another £5 billion to build 1.5 million new homes over the next five years, a futile attempt to address the housing crisis. Despite this equating to a city three times the size of Birmingham, it will fall short of accommodating the millions of migrants she intends to bring in. The only beneficiaries of this policy will be property developers and mortgage brokers. It is clear Reeves is committed to the prevailing economic mantra: “more immigrants, more houses, more debt.”
This budget spits in the face of tax payers and workers, who have already borne the brunt of the worst cost-of-living crisis since the war, and a 1p cut in the cost of a pint will hardly placate public anger.
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