Posted by 
Rachel Reeves is not, by nature, much of a gambler.
She has managed to become the UK’s first ever female chancellor through a combination of political ability, sound economic judgement and caution.
But in the Budget, she decided to bet everything on the government being able to grow the economy – and the “working people” Labour have sought to protect could end up paying the price.
Reeves stunned the Commons by announcing that she was hiking taxes by £40 billion – an astronomical sum even bigger than what had been predicted and which will take the tax burden to the highest level on record.
Capital gains tax, inheritance tax and – most significantly – employers’ National Insurance are all going up as the chancellor seeks to clear up the financial mess she says the last Tory government left behind.
Tens of billions of pounds will also be borrowed as the government turns on the spending taps.
Much of the cash will be spent on improving the NHS and schools, moves which are likely to be popular with most voters.
But look at the small print and it’s clear to see why economic experts – and plenty of Labour MPs – are nervous.
Economic growth – the government’s number one mission, don’t forget – over the next five years is set to be lower than previously forecast by the Office for Budget Responsibility.
Inflation and interest rates are also set to rise, according to the OBR, further damaging household incomes.
Treasury sources acknowledge this is a sub-optimal situation, but are pleading for patience from voters.
One said: “Do we want those growth forecasts to be higher? Yes. But we’re not going to be able to turn around 14 years in one Budget. This is our first Budget in our first term.
“What the chancellor has set out is an honest Budget in response to the scale of the challenge we face.
“We’ve had to take difficult decisions on tax in order to bring back stability to the economy.
“We’re not immune to the consequences of our decisions, but the consequences of not acting would have been to lose control of economic stability.”
But there was an ominous warning from the highly-respected Institute for Fiscal Studies, whose director Paul Johnson said: “Somebody will pay for the higher taxes – largely working people.”
With the Labour government’s popularity already cratering barely three months after the election, a major financial hit to those who helped put them in office is the last thing Reeves and Keir Starmer need.
The chancellor desperately needs her big Budget gamble to pay off.
Related…
