The long-awaited red box has finally emerged from 11 Downing Street, for the first time in the hands of the first female chancellor, Rachel Reeves – now what? There have been many cries of broken promises and foul play from the opposition, but is this a fair evaluation? What other issues did the budget uncover?
What’s in the red box?
Rachel Reeves, the newly appointed
Chancellor of the Exchequer.
The headline of the budget is that labour will raise an extra £70 Bn – 1.2% of GDP making it UK's biggest increase of the century. Reeves plans to achieve this through a myriad of new taxes including an increase in employer contributions to national insurance, closing non-dom loopholes and placing VAT on private schools together with an increase in borrowing of £30 Bn. Curiously though she announced that the tax brackets would increase in line with inflation come 2028, possibly hoping that a tax cut near the next election may favour their chances.
Budget Buzz: What You Need to Know
Broadly, these reforms have been praised by economists with the hope that the increased investment will lead to long-term economic growth. There has also been broad support for increased investment in the NHS and education. Additionally, the taxes on the ultra rich are also increasingly popular, with many believing that those who own private jets or have millions of pounds tied up in property should be taxed in line with the rest of the population.
Rishi Sunak, the used-to-be Prime Minister.
This is not to say that the budget has been without flaws. The main attack made by former PM and outgoing Tory leader Rishi Sunak was that they broke their election promises of not increasing tax. This line of enquiry though is childish critique for the sake of it. This was clearly the premeditated line that Sunk has decided he was going to weight in on before even hearing of the reforms. Furthermore, the only ones paying more tax are the ultra wealthy and employers, leading me to believe that the public should not be worried. A more sensible line of enquiry is to ask that if this higher borrowing will make the government more vulnerable to economic shocks and that this is a very short-term policy. Increased government debt leads to higher interest rate payments which limits the flexibility of government to respond to economic shocks as more of its spending is tied up. This combined with reduced fiscal space – governments ability to spend or cut taxes without jeopardizing its financial stability – could be a very dangerous combination. Furthermore, while a major goal of this labour government has been to drive investment from businesses in the UK, the increased debt may in fact do the opposite as they worry that UK debt may become unsustainable and so demand higher interest rates in exchange for the increased risk
Big Picture Budgeting
One of the largest criticisms however, is the enormous amount of time elapsed – almost 4 months – between election day and the budget coming out. In this time Starmer has gone from 30% unfavourable rating to over 50%. To make matters worse, the budget was not intricately complicated, there were no drastic or complicated reforms, like devolution for example, and thus the delay seemed needless. Some people argue that labour used this time to exacerbate a “black hole in the public finances” that the Tories left behind, but apart from that, this was crucial and very expensive time wasted. We’ve all heard the saying that first impressions count, and such slow-sogging start may leave a lingering aftertaste.
Sir Keir Starmer on a visit to NHS.
Another major criticism of this budget is that despite the numbers being large, the ambition is small. There is no new front being explored by labour here, they could have leaned hard into investing into AI and technology while modernising the NHS too. Instead, the Labour came out with a bland centrist budget where they are epitomising the old adage that the UK attempts to provide Scandinavian social services with American tax levels. Though the counter argument to this being that this is the boring, unpopular budget that labour has gotten out the way at the beginning. However, I would argue that these long-term supply-side ideas to increase the UK’s economic output take a long time to start to reap any rewards. The danger begins to emerge that they may leave it too long. If this budget is unsuccessful in the long-term, the next election could be a right-wing resurgence which will dam the UK to right wing populism having alienated the public by spending a massive amount on these schemes but with no rewards to show for it.
Overall, it is clear to see that this was a successful budget in the short term, and that the groundwork for longer term success have been laid. The lack of ambition combined with the eternal wait for it is likely to harm the party somewhat, but that it is solid foundations which can be built upon, but this must now become a priority for the government.
Written by Reuben Parish - Year 12