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October 30, 2024 - 5:10pm
“This Budget raises taxes by £40 billion,” Rachel Reeves told the House of Commons this afternoon. Even in the world of Government finances, where big numbers start to sound like small change down the back of the Chancellor’s sofa, that figure stands out. This Labour ministry’s first Budget was, first and foremost, a tax-raising endeavour — and a big one at that.
About £25 billion of extra tax is set to be raised through employers’ national insurance contributions, which will go up from 13.8% to 15% — compounded by a fall in the earnings threshold required to pay the tax, from £9,100 to £5,000. Labour will be hoping taxing employers, rather than taxing employees directly, will allow the party to weather the challenge that this is a stealth tax rise on the very “working people” the Budget was stated to protect.
Less ambiguously targeted was the £9 billion set to be raised by ending non-dom tax arrangements for the global elite, alongside another £2 billion from changing inheritance tax rules, and big hikes in capital gains tax rates. It would be hard to make the charge of these being tax rises on “working people” stick.
And that’s just the tax rises in this Budget. Last week, at the stroke of the Chancellor’s pen, Britain’s fiscal rules were updated to use a different technical definition of debt, opening up capacity for much more state spending: £100 billion more over the next five years, to be exact.
The message was clear: expect more tax and spend from this new government. So far, so Labour. Whether this Budget is the first step in Keir Starmer’s stated mission of “national renewal” will hinge on whether this latest round of tax and spend really does get economic growth back on track.
We’re a decade and a half into consecutive chancellors delivering sober assessments of the public finances. Growth since the financial crisis has been dire, and without growth the only way to keep the books balanced is by cutting back spending — or raising taxes.
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SubscribeLovely. But tax alone does not more growth make. How can Great Britain be made great? Great in manufacturing, in IT, in AI, in IP, and suchlike. This arises from the brains and guts of the populace (intelligence and bravery). Throwing money at the problem will not solve the problem. Wicked problems change in form and solvency after each attempt to solve. I suggest this government requires wisdom to fix what ails the UK. I wish them well in this attempt. It will not be easy ….
“Labour, now the party of working-age people as well as of workers,”
…Really?
So comments are finally back …
Rubbish.
Labour isn’t the party of working age people. It’s the party of working age state employees and those dependent upon the state. The author apparently hasn’t noticed just how low their total vote and vote share was in the last general election.
A more than 1.2% rise in empoyer national insurance is exactly the same as a slightly over 1.2% increase in income tax. All it means is that the employer takes the short term hit and the balance is taken out of future salary increases – either that or fewer jobs.
This is so pathetically shortsighted:
“Rishi Sunak and the Tory Party that he leads until the end of this week can cry foul from the Opposition benches, but their dwindling voter base is overwhelmingly retired, and just not that interested in economic growth: their voters would rather an empty field than green infrastructure to enable the Britain of tomorrow. So much for the party of enterprise and personal ambition.”
Firstly, how patronising to suppose that older people don’t care about the future. Does he actually talk to any of them ?
Secondly, the lazy assumption that things in future will continue exactly as they are today. We know there’s a pendulum effect in politics. If the author’s argument were true, young black voters wouldn’t be turning towards Trump in the US.
Finally, since the author decided to have a go at green fields, some words from Pink Floyd’s “Wish You Were Here”:
So, so you think you can tell
Heaven from Hell,
Blue skiess from pain.
Can you tell a green field
From a cold steel rail?
A smile from a veil?
Do you think you can tell?
The cold steel rail of an unbuilt HS2 isn’t necessarily superior to a green field. In some cases, it might be. But we sure have a government that can’t tell now. Cold steel apparatchiks …
I guess the guy has never heard of ageism. And pretty funny that he is likely young and they will be paying for such policies for a long time to come.
Looks good on them.
Betteridge’s law of headlines applies here, regrettably.
“It’s remarkable that the country’s best bet for economic growth may well be a Labour Party starved of funds for its Government spending ambitions. Rishi Sunak and the Tory Party that he leads until the end of this week can cry foul from the Opposition benches, but their dwindling voter base is overwhelmingly retired, and just not that interested in economic growth.”
Really offensive total nonsense. All senior people realise that growth is essential if they are going to be supported in their retirement having worked hard all their lives. That is not just the public sector, but private sector pension schemes rely on stock market investments which need growth to provide the money to pay those pensions.
Does the author also not realise that the people seniors most care about are not themselves but their children and grandchildren? A healthy growing economy is vital to them too.
The issue with the budget is that it will cripple growth. We already have millionaire selling up and leaving the country. That trend will only increase under this socialist tax and spend money they do not have government. As Maggie once said is they always end up running out of other peoples’ money.
Praying for Reform or even a Tory revival in 2029 is all well and good, but how much damage is going to be done in the next 4-5 years? Especially with red Ed Millipede blowing the £Bns the new taxes might raise on pointless net zero projects we may well be having power cuts all over the country on cold still winter’s nights by 2028.
That is is a Budget for Growth is simply not the case given the severe impositions placed upon the private sector supply side of the economy. It is utterly cynical to pretend that rises in employers NIC won’t have an adverse effect on “working people” in the private sector, which, of course, is the principal wealth generating sector. It’s utterly cynical to pretend that rises in employers NIC won’t constrict employment, investment and productivity in the private sector especially amongst SME’s. Growth will again be hampered as is recognised by the OBR as they downgrade GDP growth forecasts. Our country gets poorer and poorer with each passing government.
Further, it was sad to see more money being thrown at the NHS without any mention of reform of this bloated institution. NHS productivity will remain poor and eight to ten hour waits in A&E will remain the norm. It is also scandalous that there was no specific mention of adult social care.
All in all a bad budget aimed mainly at appeasing the public sector trade unions.
Why are the richest countries on the planet, low tax that attract and home the richest people? Why di public employees pay ” tax” that is simply handing back what the government gave them in the first place? Why is Britain the only left wing country in Europe?
This appears to completely contradict Aris Roussinos’s essay, which is published elsewhere on here. He has taken the time to note the problems of things like high energy costs, eschewing nuclear power and losing primary steel production capability.
This often happens with Unherd, probably in an attempt to provide ‘balance’. Two simultaneous articles giving two sides of an argument.
The OBR is clear. Growth will be anaemic at best. Then again, it is entirely possible that there will be no growth at all, in which case taxes will go up yet further to sustain public services, which will in turn depress the economy even further, and so on to the meeting with the IMF.
There is no political party today prepared to spell out the uncomfortable truth. As a nation, we are living beyond our means. Call it austerity – which has not in fact yet been tried – if you will, but the books are never going to balance without severe restraint on public spending and an economic climate that encourages businesses to invest and grow.
Public sector productivity is critical. Yet it seems Ministers have neither the will nor the ability to get hold of the top civil servants and hold their trousers to the fire.
Meanwhile, the polls show what they have always shown. People want more public spending paid for by someone other than themselves.
We need a new Thatcher. But only for two terms. Her third was a right mess.
The Tories’ voters would rather their voters “would rather an empty field than green infrastructure to enable the Britain of tomorrow” Does anyone truly believe that renewables are the answer to Britain’s energy needs? Personally I doubt it, especially left to an idiot like Ed Milliband to deliver.
Answer: no!
This is the worst article published on UnHerd. There is almost universal agreement that this budget is a recipe for rising unemployment and inflation linked to spiralling government debt.
The entrepreneurs we need to produce growth will go elsewhere, even if they are not forcibly removed to protect their Non Dom assets.
Do we have to wait for a wilsonesque devaluation before the scales fall from the eyes of misled voters!!
And to get real growth you have to stand Osborne on his head. Not just abandon the austerity and small-statism, but quit the wage lowering, benefit slashing approach to reducing unemployment which instituted a low productivity economy and made growth depend overwhelmingly on employing more cheap workers, even if it meant importing them. Leave aside notions like seeing offering jobs as a public benefit which entitles employers to raid the national till.
Instead, commit to raising productivity, wages and the standard of public services. The budget makes sure those who employ more than 40 or 50 are incentivised to organise and invest to reduce employment in relation to what’s produced, That restores an original dynamic of capitalism, and frees up people to carry forward the jig new investments being made without ramping up immigration.
Of course, sustaining such an upward growth spiral will depend on many things, but at least the government has taken the responsibility to point employers, private and public, in the right direction.