FOR Rachel Reeves, the news just gets worse.
The economy remained static in July, while inflation in August stood unchanged at — nearly twice the ’s target and one of the highest rates in the developed world.
If Rachel Reeves breaks key promise in Budget then she’s doomed
Food inflation in the UK
Food prices are especially rampant, rising by 5.1 per cent in the year to August.
But it really will be curtains for if she does — as she was reported yesterday to be thinking of doing — break her promise not to raise rates of income tax, National Insurance or VAT.
She will be as doomed as was when he raised taxes after promising Americans in the 1988 election campaign: “Read my lips, no new taxes.”
Unbelievably, she is said to be planning once again to blame her latest “fiscal black hole” on the — with no mention of the fat pay rises for doctors, train drivers and the rest which she has herself waved through.
‘Squeeze the rich’
are racing ahead at 5.7 per cent, and worse, pay settlements have been awarded without any requirement for workers to improve lamentable productivity.
It is no wonder that inflation is so high.
Another cause of high inflation is this year’s increase in employers’ , which are now levied in incomes above £5,000 rather than £9,100, as previously.
These have increased costs for supermarkets and food producers, especially as both employ large numbers of part-time workers earning less than £9,100 a year.
With income tax thresholds frozen, we are perilously close to a first in Britain — where even people on the basic state pension are dragged into the tax net.
None of this should really come as a surprise.
Ever since this government was elected it has been clear that this is not a administration in the style of — whose moderate policies were often damned by his own party as “Tory lite”.
To find something like it — soaring inflation, low growth and punitive taxes — it is necessary to go back nearly 50 years.
You have to be near retirement age now to remember the horrors of the 1970s when Labour Chancellor Denis Healey promised to “squeeze the rich until the pips squeak”.
His enormous eyebrows quivering with delight, he imposed a top rate of income tax of 83 per cent — or up to 98 per cent in the case of “unearned income” from investments.
It really will be curtains for the Chancellor if she does break her promise not to raise rates of income tax, National Insurance or VAT
But life wasn’t much better for ordinary people, either. The basic rate of income tax was 34 per cent.
Surely Rachel Reeves, with her promises about growing the economy, won’t want to go quite as far as Healey did.
Labour Chancellor Denis Healey who promised to ‘squeeze the rich until the pips squeak’
Yet remarkably, she already has.
We might not have such punitive headline tax rates as we did half a century ago, but the overall tax burden is higher now than it was then.
In 1978/79 — Labour’s last year in office at that time — income tax receipts were equivalent to 9.7 per cent of GDP.
This year they are 11 per cent.
The overall tax burden, at 35.3 per cent, is already higher than it was in the 1970s and is forecast by the Office for Budget Responsibility to reach 37.7 per cent by 2027/28, which would be the highest level ever recorded — greater even than in the late 1940s when Britain emerged blinking from with huge debts to repay, and when Clement Attlee’s socialist government was trying to nationalise everything in sight.
Not only that, the forecast for 2027/28 is based on existing tax rises already announced by the Government.
It doesn’t take into account measures which will be announced in the Budget on November 26.
We have had a foretaste of that dripped out of Downing Street in recent weeks, and it doesn’t look good.
There have been leaked proposals for new taxes on anything from property investors to horse-racing.
Meanwhile, any hope of restoring the health of the public finances by cutting spending rather than increasing taxes has been snuffed out by the refusal of Labour backbenchers to support even modest reforms to the out-of-control benefits system.
They are baying instead for a wealth tax which they foolishly imagine will solve all the country’s fiscal ills.
They would be lucky if it raised any extra revenue at all.
Wealthy soon flee
The experience of other countries is that the wealthy soon flee, taking their wealth with them.
To be fair to Reeves she is not entirely to blame for our poor finances.
Britain has been running a deficit continuously since s latter years as Chancellor, which was made worse by the Covid pandemic.
There is no bad situation which a Labour government cannot make worse
Ross Clark
The Conservatives deserve blame for losing the financial discipline they showed in ’s early days.
Feeble productivity is a problem which no government of either colour has been able to solve.
According to Labour’s favourite think-tank, the Resolution Foundation, average household incomes would now stand at £51,000 if they had increased at the same rate they did between 1995 and 2005.
Instead, they languish at £31,000.
Just think what your family could do with an extra £20,000 a year.
That is the price we are paying for becoming a low-growth economy.
But there is no bad situation which a Labour government cannot make worse.
Once again, a greedy Labour government is going to leave us with an enormous bill.
