Rachel Reeves has spent the morning out on the media round trying to sell her first Budget to the public. The Chancellor woke to a critical reception from the media – with headlines including ‘Halloween Horror Show’, ‘Nightmare on Downing Street’ and ‘Return of tax and spend’. Meanwhile, she is facing a backlash from the farming community, citing betrayal over the news that inheritance tax relief for farms will be limited to £1 million.
When pressed, Reeves would not rule out further tax rises later down the line
Speaking to the BBC’s Nick Robinson, Reeves was put on the defensive as she was asked to explain why she claimed ‘every Labour policy will be fully-funded and fully costed no ifs, no buts’ only to then jack up taxes to the tune of £40 billion. The Chancellor was also asked how she squared her previous claim that ‘economic growth comes from the success of business’ with her decision to put a ‘£25 billion tax on British business’ through employer national insurance. In her responses, Reeves repeatedly blamed the Tories for the ‘hard choices’ she had been forced to make – despite the OBR casting doubts on her claim to have inherited a £22 billion ‘black hole’ from the Conservative party. Reeves did acknowledge that there would be consequences to her tax rises such as smaller pay rises.
Speaking on Wednesday night at a meeting of the parliamentary Labour party, Reeves at least received a warmer reception. She urged the party to take the fight to the Tories as she made clear the political choice of the budget: ‘If they disagree with our taxes on the wealthiest or on business, they will not be able to protect the incomes of working people.’ It means that despite the criticism in the media and concerns about whether the measures will have the opposite of the intended effect on growth, Reeves’s budget is landing okay with her own party for the time being.
But could this change? It’s notable that when pressed, Reeves would not rule out further tax rises later down the line. She refused to do so nine times on the Sun’s Never Mind The Ballots – though did say she hoped the Budget would be a one-off. According to the IFS’s Paul Johnson she could need to. The head of the fiscal watchdog points out that the additional spending in the Budget is noticeably front loaded – rising over the next two years and then falling sharply. Speaking today Johnson says he is ‘willing to bet a substantial sum that day-to-day public service spending will in fact increase more quickly than supposedly planned after next year’. As I write in this week’s magazine, there are a band of cabinet ministers who would like to see that happen. If growth does not improve quickly enough, the next Labour cabinet debate could be over the manifesto promises made on tax.
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