The Chancellor’s speech yesterday was really very odd indeed. It benefited from all the gravitas of a Downing Street address to the nation, but was remarkably thin on substance.
She created an atmosphere of high drama but left her audience with nothing but questions to which she was unable or unwilling to provide an answer.
She spent 20 minutes seemingly building up to some kind of announcement or conclusion but in the end we were left only with a ‘vibes based’ approach to expectation management. The political rationale for such a highly unusual pre-Budget intervention is understandable; it was designed to engineer a sense that these are unusual times and we’re fortunate to have a far-sighted Chancellor that can steer the country through dangerous waters.
But this only holds water if you believe two things. Firstly, that the economic situation has fundamentally changed since Labour’s first Budget a year ago and, secondly, that this government has the right policy prescription to save the day. It’s a tall order.
Everything the Chancellor pointed to this morning (David Cameron’s public spending cuts; Brexit; the pandemic; energy price shocks; and Liz Truss) were all perfectly well known a year ago. It was well understood before the 2024 election that growth was not where it should be, debt interest payments were too high, productivity was too low and demands on the public purse were increasing.
Fixed the foundations?
The primary response to all of this, 12 months ago, was £40bn worth of tax hikes unveiled in Labour’s inaugural Budget to fuel higher spending. Yesterday Reeves said that was about “fixing the foundations” but now it turns out the roof is falling in and fixing it is going to be expensive.
How expensive? She wouldn’t say.
After her speech, journalists peppered her with the obvious questions such as “does this mean taxes are going up?” and “are you about to break your manifesto promises?” but she ignored them and insisted she’d set it all out at the Budget. Until that day comes, these questions will dog her and depress the country.
The Chancellor’s speech yesterday was an act of such effrontery that if she follows it through with an increase in income tax, she must resign. Having presided over higher taxes, higher borrowing, rising unemployment and anaemic growth, she wants us to believe that none of it is her fault. However, despite yesterday’s theatrical effort to claim that her hands are tied, this is about choices and Reeves chooses higher taxes.
The price will be high, and one way or another we’ll all be forced to pay it.