So just what was the point in dragging political journalists out of bed to be addressed by Rachel Reeves in Downing Street this morning? We could – and should – have had the Budget by now. Instead, we got a half Budget speech – a desperate attempt to blame the Tories, a vague suggestion that taxes are going to go up (which we know anyway) without any details. We heard yet more about Liz Truss and Kwasi Kwarteng, despite the fact that they have been out of office for more than three years. Reeves herself has been in office approximately ten times as long as Truss and Kwarteng were. Reeves is fooling herself if she thinks that the public are going to swallow her excuses.
Reeves is thus trying to play a round of golf with just one club: tax rises
Reeves is trying to tell us that in three weeks’ time she will sort out Britain’s fiscal position for good – that will be the rationale for the increasingly inevitable rise in income tax rates. Yet that is what she told us last year: it was going to be a one-off. But it wasn’t. She is coming back this year to raise taxes just as much as she did last year: by around £40 billion. There is nothing about today’s speech that provides any confidence that she – or more likely her successor – will not be back next year, too.
Having retreated on modest cuts to welfare spending in the summer, the government has made it all but impossible to get any further spending cuts past backbenchers. Further borrowing has been pretty well ruled out, not so much by Reeves as by the markets. Reeves is thus trying to play a round of golf with just one club: tax rises.
Reeves’ latest black hole comes as a result of the Office for Budget Responsibility’s downgrading of assumptions about productivity in its economic forecasts. She blamed the Tories for this, too. But Labour’s record on productivity is far worse. Look at the Office for National Statistics’ figures for productivity in the public services, published yesterday. However much Reeves chirrups about AI transforming our economy, the plain fact is that public service productivity fell by 0.7 per cent in the year to the second quarter of 2025. The rebound which followed the dive during the pandemic has fizzled out. We are getting three per cent less, pound for pound, out of our public sector workers than we were in 2019. The public sector is just 1.6 per cent more productive than it was in 1997; a period of growth between 2010 and 2019 wiped out by what went before and since.
It is a shocking record, and Reeves cannot try to pass the blame onto anyone else: it was she who waved through large public sector wage rises without any requirement to improve working practices. That, as much as anything, is why she is having to come back for a second round of hefty tax rises.
What will those tax rises be? If Reeves was hoping to dampen down speculation through today’s press conference, she has failed miserably. We face another three weeks of wondering what she is going to do in the Budget. That is three more weeks in which businesses won’t be investing for fear of what might lie ahead, three more weeks when homebuyers won’t be buying.
Never have we had such a wretched Budget season. Reeves will not survive breaking a manifesto promise as blatantly as she seems to be planning to do, and neither will Starmer; no Chancellor or Prime Minister would. The trouble is there is no quick exit route for this government, so large is its majority. If income taxes are raised on 26 November the years of zombie government will commence. We face nearly four years of a government hardly anyone wants but no-one can get rid off.
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