Reeves and Starmer made a calculation once elected. They calculated that with a super majority and marathon five year term ahead of them they could put forward some pretty grim policies they thought would feed the treasury this year in a bid to create room for more palatable election gimmicks later in their term.
As anyone somewhat logically-minded could have forecast however, those policies were never going to work financially. We don’t tax and disincentivise private schooling because every child not in the state system is a net gain to the treasury. We pay a universal winter fuel allowance to keep our elderly warm and financially stable because it is right but also because it is a net gain to the budgets of our public health system.
We offer tax breaks to farmers because making British farming more sustainable provides a net-gain to our food eco-system. We don’t hike National Insurance for employers because incentivising companies to employ more staff is a net gain to our income tax bill and a reduction to our welfare bill. And so it goes on.
Rachel Reeves has come under increased pressure with financial markets in turmoil.
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These are all simple treasury calculations, not about political ideologies. Not understanding this has taken us from being the fastest growing economy in the G7 to one forecasted to grow at a rate of 0% with alarm bells sounding of a recession. It has brought ‘fiscal headroom’ crashing down and left long-term borrowing costs at the highest level since 1998.
Downing Street went digging for funds only to find they have dug themselves an empty hole. Now the government are stuck in it with no idea of how to get out of it.
And if past Labour governments are anything to go by the playbook they will reach for in desperation is obvious. More tax rises, more state intervention. Raising state funds not by growth and supporting wealth creation but by pawing for a bigger share of what exists.
Keir Starmer must scrap tax rises and focus on growth and supporting British businesses.
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This is where it gets scary. If what they put forward last year was deemed the best of their ideas what on earth is in the desperation playbook of tax rises?
A New Year’s resolution worth making for No.10 would of been to go back to the playbook that works. Creating growth, supporting business and backing individual freedom.
I expect however we will have to buckle up for harder times. Small business owners, pensioners and farmers have carried the brunt so far – this year even more of us will face the consequences of a Labour government.