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Budget unveils big tax, borrowing and spending plans A change-making Budget and a moment of jeopardy
(about 3 hours later)
I said this morning this Budget would be big. And big is exactly what it is. This was a huge, change-making budget.
We got a sense of that very early on from the chancellor, when she said: "This Budget raises taxes by £40bn." Don’t let anyone tell you there isn’t much difference between the main parties at Westminster.
To state the obvious, that is a massive amount of money. This was a Budget with Labour’s instincts and worldview stamped throughout it.
The thrust of what we have heard is very much in line with what we reported in advance – with one or two tax rises suggested in some places that are not actually happening. There are the tax rises visible from near-earth orbit, the self imposed borrowing rules shredded and re-written - to allow more borrowing - and big wads of spending for the NHS, just for starters.
So, the thresholds at which levels of income tax and National Insurance contributions are paid, which are frozen until 2028, will be unfrozen then. I lost track during the election campaign of how often Labour folk insisted they had “no plans” to put up taxes beyond a relatively narrow band of those they said would rise.
That's the opposite of what was expected. Looked at now you don’t have to be wildly uncharitable to conclude that was comprehensive baloney.
Labour, psychologically scarred by losing far more elections than they win, tend to try to hug the Conservatives close when it comes to tax and spending plans before elections where they think they can beat them, fearing anything else will spook swing voters and cost them the contest.
This is not a Budget we want to repeat, says Reeves And, pretty much, that is what Labour did back in the summer.
Budget 2024: Key points at-a-glance No such caution now.
How the Budget will affect you and your money The books were worse than we thought is Labour’s mitigating plea, garnished with a we-won’t-do-it-again insistence from the chancellor in my interview with her.
Frozen thresholds contribute towards what is known as "fiscal drag" and amount to big tax rises – where people can be hauled into paying a tax, or a higher rate of it, courtesy of inflation. “This is not the sort of Budget we would want to repeat,” Rachel Reeves told me.
But it is worth remembering that Rachel Reeves could have unfrozen the thresholds before 2028 and chose not to, and could later choose to maintain the freeze. For the chancellor, we now enter the valley of maximum scrutiny and jeopardy for her prospectus.
The other tax rise many thought could happen but did not was fuel duty. Journalists, policy experts, industry, trade unions, you as readers have a chance to properly squirrel away at the detail and ask awkward questions.
But put these two to one side – this is a massive tax raising budget. You will see the chancellor on BBC television and hear her on the radio.
Alongside it, where they will spend some of that money – on the NHS and schools in England, for instance. Senior figures insist they want to embrace this scrutiny.
Big taxes, big borrowing and big spending. They point out she didn’t go on TV and radio shows last Sunday, before the Budget, as has become recent infuriating tradition – where journalists ask pertinent questions about the content of the Budget and are repeatedly told to wait until Wednesday.
But also projected pretty anaemic growth and inflation above its 2% target. She will instead be appearing this Sunday, alongside the new Conservative leader elected on Saturday, no doubt.
There is one big question – will all this make enough difference that people think their lives are getting better? So where might that scrutiny come? All the big stuff, for sure – the tax rises, the borrowing, the spending.
But I always like to keep an eye on the rows that may appear smaller but have the potential to blow up in a government’s face.
There is already real anger among many farmers about changes to inheritance tax which they fear will mean lots of farming families will no longer be able to pass on their life’s work and business to the next generation.
And a couple of big picture, longer-term thoughts to ponder.
This is a government with a central mission of helping to drive up economic growth.
And yet the projections for growth appear stubbornly anaemic, as our economics editor, Faisal Islam, writes.
And there is a similar observation from the Institute for Fiscal Studies, external, who have crunched the numbers on the forecasts for the money we are each likely to have in our pockets in the coming years, once bills are sorted – per capita disposable income, to use the language of economists.
They conclude its rate of growth, while up a smidgen on where it’s been in recent years, is still pretty piffling.
The government will hope the forecasts are wrong – and they can be.
But, as I have written before, what seems to be a huge contributor to the anti-politics mood as well as wild political volatility is that unshiftable financial reality for many: the brutal truth that things haven’t got much better, if at all better, for ages and ages and ages.
And, in the end, the persistence of that trend, or its marked end, will matter more to millions of people and the likely eventual fate of this government than plenty of the other Budget numbers being picked over right now.