Raising taxes would be a relief for Rachel Reeves

The Chancellor Rachel Reeves was in far better form when she appeared again in public alongside the Prime Minister Sir Keir Starmer yesterday. The tears have been wiped away and she has a smile, even if a slightly forced one, back on her face. The reason is not hard to work out. She has started preparing the ground for another round of big tax rises in the autumn. And that is the one thing she is good at. Reeves is back in her comfort zone. 

In the wake of the backbench rebellion that forced the government to abandon its welfare reforms, and with the U-turn on the winter fuel allowance, a ‘black hole’, as Reeves would no doubt describe it, has opened up in the government’s finances. Some forecasts suggest that as much as £40 billion in extra revenue may have to be found from somewhere. Yesterday, Reeves hinted at the answer, arguing that the extra costs ‘would be reflected in the Budget’. You hardly need to be Alan Turing to decode that. Taxes are going up. 

For Reeves that will, if we are being honest, come as a relief. She has tried being the ‘growth growth, growth’ Chancellor, but found it all too much of a struggle. The National Wealth Fund does not appear to have any plans to do anything, no one showed up to her investment summit, and the only initiative she was left with was a third runaway at Heathrow, a project that has been argued over for twenty years and shows little sign of actually happening. She has also tried to be a cost-cutting Chancellor. But that didn’t work out very well either, with her MPs throwing out plans to make any meaningful reductions in spending. It appears that Reeves does not have the imagination or the leadership skills for either growth or controlling spending.

There is, however, one thing she is good at. Raising taxes. From her first year in office, it appears she is most comfortable when she is doing what her Treasury officials tell her, and the Treasury loves nothing more than collecting more revenue. We can expect a whole range of measures, from frozen thresholds to higher capital gains taxes, to a banking levy, and perhaps the return of the 50 per cent top rate to appease the left of her party. Reeves is back doing what she does best – it is just a shame that the rest of us will have to pay for it all.