Rachel Reeves, please, let’s make budgets boring again | Heather Stewart
Rachel Reeves should put us all out of our misery this Wednesday with a tax-and-spend statement bold enough to make future budgets boring again.Ask any economist or policy wonk and they’ll tell you the buildup to this year’s budget has been among the most drawn-out and chaotic they can remember.Treasury insiders are adamant they have maintained the same “Labour values” throughout and that Reeves first scribbled down her top three priorities – the NHS, the cost of living and the public debt – as long ago as July.But the combination of volatile bond markets, pass-or-fail fiscal rules, and Reeves’s decision to leave herself with less than £10bn of headroom against them, has led to months of uncertainty and indecision.It is not meant to be like this: aside from the agenda-setting first budget that follows a general election victory, and outside economic crises (though goodness knows we have had plenty), budgets should be reassuringly dull.
Chancellors whose principles are clearly understood by the public and the markets ideally keep a steady hand on the tiller of tax-and-spend policy,A memorable budget tends to be a bad budget: Gordon Brown’s too-clever-by-half abolition of the 10p starting rate of income tax in 2008; George Osborne’s “omnishambles” in 2012; Anthony Barber’s “dash for growth” in 1972, subsequently blamed for uncorking an unsustainable boom,Reeves had not intended to be an exciting chancellor,Indeed, she and Keir Starmer hoped that by being the cautious and sensible successors to the five-leaders-in a-decade Tories, they would reap economic benefits,Investors glad to see the back of Conservative chaos would return to the UK; a more stable relationship with the EU would help to reduce trade barriers; growth would follow.
But the hoped-for stability has not materialised.Part of the explanation is the shaky global backdrop.But the problem also lies in the miasma of gloom and uncertainty that has surrounded an administration often unable to give a clear account of itself, even to its own MPs.Reeves needs to do at least three things on Wednesday to cut through the fog and buy herself the time and space to deliver another, much less exciting budget in a year’s time.First, she should be brave enough to increase her headroom significantly.
Markets appear to be expecting a doubling, to £20bn,There are trade-offs here, as the chancellor has repeatedly made clear,Stonking tax rises threaten economic growth, which is already anaemic,But she needs to give herself enough room for manoeuvre to avoid every spit and cough of economic data fuelling a market reappraisal of whether she can meet her rules,Executed with force and clarity, this approach could pay dividends in lower government borrowing costs.
It should also make space for the Bank of England to deliver much-needed rate cuts.Second, Reeves seems to be minded to downgrade the status of the OBR’s spring forecast, so that its chair, Richard Hughes, and his number crunchers will opine on the state of the economy but not mark her against her fiscal targets.This change, recommended by the International Monetary Fund, seems sensible: the UK is an outlier in having what have in effect become two big fiscal events a year.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionIt was the evaporation of Reeves’s headroom in the OBR’s March forecast that prompted the botched welfare changes in the spring.The less drama is provoked by the OBR’s next set of forecasts, the better.
Third, and perhaps most challengingly, Reeves needs to set a clear and compelling direction of travel.How is it that Labour intends to “change” the UK, as its manifesto pledged? And how can the costs of that transformation be met fairly?The “one and done” framing of last year’s budget, with Reeves telling the CBI she would not have to come back for more after raising taxes by a historic £40bn, left few clues as to how she would handle this year’s main roadblock, of the OBR revisiting its productivity forecasts (something Labour wonks always knew was a possibility, incidentally).When Labour came to power, she didn’t kick off a review into how to tax wealth better, or to reform the crazily regressive council tax, or to look again at the pensions triple lock – offering clues to her principles.Instead, the straitjacket of the manifesto tax promises resulted in the £25bn employer national insurance contributions increase that many observers, including at the Bank of England, believe has put the brakes on hiring and boosted inflation.Some of her clearest language in last year’s budget was reserved for the idea of freezing income tax thresholds, which would, she said, “hurt working people”.
She is now expected to do exactly that on Wednesday.Raising income tax, in clear contravention of the manifesto promises, was an alternative way through this week’s budget, as part of a “go big” package that would have jacked up Reeves’s headroom significantly.The argument, tested by the chancellor in her “scene setter speech”, would have been that “if we are to build the future of Britain together, we will all have to contribute to that effort”.If, as expected, she has reverted to a pick’n’mix of tax changes, she will need a different argument to tie them together.They may well, in fact, all be progressive – hitting higher earners and the wealthy harder – but she will need to say that loud and clear to make the budget feel coherent.
Everyone – from the bond vigilantes who could sink the budget, to fed-up voters at home – would benefit from a much clearer sense of this Labour chancellor’s principles and purpose,That would make next year’s budget reassuringly boring – if she is still around to deliver it,
Iqbal Mohamed becomes second MP to quit Your Party
A second MP within a week has quit Your Party in acrimonious circumstances, throwing yet more doubt on the viability of the leftwing group co-led by Jeremy Corbyn and Zarah Sultana.In a statement on X, Iqbal Mohamed, who was elected as the independent MP for Dewsbury and Batley last year, said his decision to leave was after “many false allegations and smears” against him and others, which he did not explain.Last Friday another independent MP involved in Your Party, Adnan Hussain, quit because of what he called “persistent infighting and a struggle for power” in the organisation.In his statement, Mohamed said he wished the best for Your Party, but that “after careful consideration” he had decided to leave it and remain as an independent.He wrote: “The many false allegations and smears made against me and others, and reported as fact without evidence, have been surprising and disappointing
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Nigel Farage is facing calls to investigate and root out links between Reform UK and Russia after one of his party’s former senior politicians was jailed for 10 years for accepting bribes from a pro-Kremlin agent.Keir Starmer said Farage had questions to answer about how this happened in his party. Nathan Gill, a former leader of Reform UK in Wales, admitted taking payments to make statements in favour of Russia.The sentencing came at the end of a damaging week for Farage in which the Guardian revealed accusations that he engaged in racist chants and comments while at school more than 40 years ago, which he denies.Reform UK remains about 10 points ahead in opinion polls, but Labour believes the party is vulnerable to criticism that Farage and his allies have been too pro-Russia, with the Gill case proving that a paid pro-Kremlin propagandist was allowed to rise to become a senior leader
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Keir Starmer has attempted to dampen the latest round of speculation about his leadership, insisting that one of his potential rivals, Andy Burnham, is doing a “really good job as mayor of Manchester” and warning colleagues not to waste their time briefing against each other.The prime minister gave his backing to Burnham on Thursday night as he travelled to the G20 summit in Johannesburg, after the Greater Manchester mayor repeatedly failed to rule out challenging Starmer for his party’s leadership during interviews on Thursday.Burnham’s comments reignited speculation over the prime minister’s future, with his party languishing in the polls and days away from a tax-raising budget that could define the rest of his term in office.Starmer said: “Andy’s doing a really good job as mayor in Manchester and we work very closely together.”He added: “Only two days after Labour party conference we were in Manchester together in the aftermath of the terrible attack on the synagogue there
Farage’s views on Russia likely to be further tested after jailing of Nathan Gill
The discovery of a pro-Russian asset, Nathan Gill, at the heart of a British political party reads like the plot of a John Le Carré novel.Russia was long known to have been trying to interfere in foreign politics with online bots and cyber-disinformation over the past decade.However, the Nathan Gill case is now a concrete example of a pro-Russian agent enlisting and paying a Brexit-friendly party politician to spread the propaganda of Moscow and against Ukraine in Europe.In the 1960s, it tended more to be Labour and far-left politicians who were largely the subject of Soviet attempts to plant agents in the west. In modern times, it is no surprise that the parties Gill represented were Ukip, the Brexit party, and briefly Reform UK
Starmer accuses ‘spineless’ Farage of failure to tackle racism in Reform party
Nigel Farage has been accused of being “spineless” by the prime minister and a “coward” by Dulwich college contemporaries over his response to allegations of racism.Keir Starmer said the Reform UK leader had “questions to answer” about alleged comments and chants as a teenager that include songs about the Holocaust, and accusations of bullying towards minority ethnic schoolboys.He added that Farage had a “track record” when it came to racism, pointing to his failure to discipline his fellow Reform MP Sarah Pochin after she complained about the number of black and brown people she saw in adverts.Speaking to reporters on the way to the G20 summit in Johannesburg, Starmer said: “He needs to explain the comments, or alleged comments that were made, and he needs to do that as soon as possible. He hasn’t got a good track record in relation to this because Sarah Pochin, his MP, made some clearly racist comments and Nigel Farage has done absolutely nothing about it
UK politics: Reeves ‘not even sure what the popular path is’ on the budget – as it happened
The UK cannot continue to “muddle through” and must take “a different path” on the economy, the chancellor has said.Ahead of her second budget on 26 November, Rachel Reeves told the Times that the country could not continue on its current trajectory. But she admitted she was “not even sure any more what the popular path is” amid calls for a wealth tax from some politicians and heavy tax and spending cuts from others.In the interview published on Friday, Reeves said:I’m not even sure any more what the popular path is.There are lots of people who say cut taxes and the economy will grow, but what spending would they cut? Borrowing is too high, but you can’t cut it overnight
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