Michael Simmons

Rachel Reeves is reportedly looking at a 2p increase in income tax. The hike to the basic rate – paid on earnings between £12,571 and £50,270  – would take it from 20 per cent to 22 per cent. That’s still quite low by historic standards, despite the overall tax burden heading towards record highs. But it would also mean a clear and significant breach of Labour’s manifesto commitment, made just 14 months ago, not to raise the big three taxes. Would it be enough to get the Chancellor out of her fiscal hole? The Institute for Fiscal Studies recently put the size of that hole – that needs to be filled to get back to the £10 billion of headroom Reeves left herself with in the Spring – at £22 billion.

Prices are still rising fast. The Consumer Prices Index rose by 3.8 per cent in September – the same pace as in August but nearly double the Bank of England’s 2 per cent target. Markets, and the Bank itself, had expected inflation to reach 4 per cent, so the fact it has remained flat will come as a small relief to the Chancellor as she prepares for her November Budget. ‘Significantly,’ the ONS noted, food and drink inflation fell for the first time since March – down to 4.5 per cent from 5.1 per cent. Core inflation, which strips out volatile items, and services inflation both eased too. The Bank believes this is the peak of inflationary pressure, and if that proves true, it will be welcome news for everyone.

The economy is slowing down. GDP grew 0.3 per cent in the three months to August. As ever, services propped up Britain, growing by 0.4 per cent, while the production sector shrank by 0.3 per cent, according to Office for National Statistics data. We could have news of a stagnating economy confirmed just in time for Rachel Reeves’s Budget That growth over the last three months though was helped by a bumper June with the economy flat over the latest two months. If things don’t improve in the September data, then we could have news of a stagnating economy confirmed just in time for Rachel Reeves’s second Budget.

Rachel Reeves is trapped in an economic ‘doom loop’: high debt, low growth and higher debt again. But, as pessimists’ eyes turn to the Chancellor’s Budget next month, there is a way she can turn that loop into a ‘virtuous circle’. The doom loop theory of Reeves’s economy has so far gone like this: Following a fiscal event, tax receipts come in lower than expected, growth forecasts are downgraded, inflation forecasts rise – and a fiscal ‘black hole’ emerges. To fill in the hole, the Chancellor hikes taxes because her backbenchers won’t let her make cuts. The tax hikes further hamper growth, weighing down employment as companies struggle under the burden. The Chancellor calls another fiscal event – and we return to step one.

When Linden Kemkaran (formerly of The Spectator) was elected leader of Kent County Council, she presented herself as the poster-child for Reform in power. ‘The electorate,’ she said in June, ‘are looking to judge whether they can put their trust in a Reform government at the next election.’ Her administration set up ‘Dolge’, a ‘department of local government efficiency’, modelled on Elon Musk’s original, and instructed it to cut wasteful spending and find cash-saving efficiencies. After just five months, however, its efforts appear to have faltered. The council is already ‘down to the bare bones’, Diane Morton, Reform’s cabinet member for adult social care in Kent, told the Financial Times yesterday.