All the political framing of the past three months has been around Rachel Reeves’ first Budget. Black holes have been ‘discovered’, public services have been found to be in a worse state than expected, and Liz Truss has been exhumed at every opportunity (or at least, when she hasn’t been inserting herself into the political narrative).
Today’s speech from Rachel Reeves contained quite a few attempts to deal with the failures of that framing, too. She repeatedly insisted that she was keeping the promises in Labour’s election manifesto, after weeks of confusion about what ‘working people’ are. She also repeated her party conference phrase that her optimism for Britain ‘burns brighter than ever’, after accusations that she had been far too gloomy in her first few months in office. And she paid particular attention to spending announcements that she said would combat child poverty after early rows on the two child benefit limit.
That NHS funding announcement was probably the closest thing to a rabbit
Reeves told the Commons that she had taken the choice to ‘grow our economy’, as though the Conservatives had taken the deliberate path of shrinking it. She had also taken the choice to announce much of the Budget before she came to the Commons today, meaning there were few genuine surprises, which was presumably to create a contrast between the shock of Liz Truss’s mini-budget and her budget for stability.
On those working people, the Chancellor made a point of arguing that extending the freeze on income tax and national insurance thresholds ‘would hurt working people, would take more money out of their pay slips’. She insisted she was keeping the manifesto promise not to increase taxes on working people, but announced – quite quickly – that she was increasing employers’ national insurance contributions by 1.2 percentage points from April next year, and reducing the threshold at which it gets paid from £91,00 a year to £5,000 a year. That will raise £25 billion by the end of the forecast period, she said.
Reeves also confirmed that capital gains tax will rise, with the lower rate going up from 10 per cent to 18 per cent, and the higher rate going from 20 per cent to 24 per cent. And while she tried to couch her reforms to inheritance tax in friendly language about protecting farms, the Conservatives have already set to work claiming that the detail shows quite the opposite.
Towards the end of the speech, she told MPs that the reason she and her sister Ellie Reeves had joined the Labour party was the condition of the school they had attended, recalling that it had been rebuilt by the last Labour government. She announced £1.4 billion for rebuilding more than 500 schools ‘in the greatest need’, as well as reminding the Chamber of the breakfast clubs that Labour had made a key part of its election campaign. She had earlier refused to exempt SEND schools from the VAT on private school fees, something that has caused MPs across the house a great deal of angst. But she then announced a 6 per cent increase year on year in SEN funding for state schools.
She closed her speech on the NHS, with an announcement of £22.6 billion extra money in day-to-day spending and £3.1 billion for capital spending. She argued that ‘the state of the NHS that we have inherited after the most austerity decade since the NHS was founded means that reform must come alongside investment’. She said that ‘because of the difficult decisions that I have taken on tax, welfare and spending’, she could announce ‘the largest real-terms growth in day to day NHS spending outside of Covid’.
It was a clear nod to the way that the rest of the government has to cut its cloth to keep the NHS well-funded. But it was only a brief acknowledgement that one of the reasons governments seem to keep pouring money into the health service without much noticeable change is that the funding is often directed at the crisis rather than the drivers of long-term inefficiency, including poor quality buildings, equipment and staffing shortages. It’s not clear whether that new money really will be spent well, or inefficiently, given the ongoing structural issues with the health service.
That NHS funding announcement was probably the closest thing to a rabbit, even though we had already been told there would be a cash boost before the Budget announcement started. Reeves then had to sit through Rishi Sunak’s final Commons act as leader of the opposition before his successor sets the tone for the real Tory response to this fiscal statement for the rest of the autumn. She will likely be more worried about whether her own party has brighter optimism for Britain – and her Chancellorship – after this announcement.
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