Chancellor Rachel Reeves’ Halloween Budget could be a real horror show… with plenty of trick and not much treat
BARELY a day goes by where Treasury officials do not attempt to get Rachel Reeves to reverse cuts on workers’ National Insurance payments made by Jeremy Hunt.
This lobbying began the first day the new Chancellor arrived in No 11, and I hear it continues as she prepares to deliver her first Budget in just over two weeks’ time.
But Reeves is still saying no, citing the very clear promise Labour were elected on this summer, and despite a mad dash for cash.
Officials say scrapping the previous Chancellor’s four per cent cut is the quickest and easiest way to raise revenue, but politically it is a horror show.
With the exquisite timing we have come to expect from this new government, Reeves’ big moment falls the day before Halloween — and the mood music coming from the Treasury so far suggests it’s going to be plenty of trick and not much treat.
Verbal gymnastics
Which takes us to page 21 of the Labour Manifesto from June: “Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher or additional rates of income tax, or VAT.”
But if you squint, can you see some wriggle room there on hiking National Insurance on employers’ contributions?
Business Secretary Jonathan Reynolds certainly thinks so, telling broadcasters yesterday: “That pledge, it was taxes on working people, so it was specifically in the manifesto, a reference to employees and to income tax.”
Which I don’t remember Labour saying at the time.
It’s pretty clear that Reeves is preparing to hike employer contributions, and it’s pretty clear the Tories will hammer that as a straight-up manifesto breach.
And besides, National Insurance is literally a tax on jobs, whether you are pinching it directly from a worker’s pay packet, or making the cost of employing them higher for firms.
And the verbal gymnastics do not stop there.
By any definition, “working people” are clearly people in work, paying their taxes.
Now take the other mooted tax raid: Hiking capital gains taxes. Yes, they’re paid by the mega rich on stocks and shares sales, and profit on selling second, third and fourth homes.
But is that really the whole picture? The Treasury’s own figures show that of those who paid CGT in 2021/22, 50 per cent declared in their tax returns that they were in employment or self-employed.
Tricks aplenty
Which by definition at least makes half a tax on “working people”.
And drilling down into the data, 213,000 of those payers had a taxable income (after allowances and reliefs) of less than £37,700. Hardly what you would call the mega rich. And what about Sir Keir Starmer?
In 2022/23 he paid £52,688 in capital gains tax after the £275,739 sale of a field behind his parents’ old home in Surrey. Does our self-proclaimed socialist PM really not consider himself to be a working person?
So tricks aplenty are on their way, but will there be any treats? Treasury insiders insist Reeves will not pull the “tax levers lightly” with Whitehall grumbling at the stringent spending restraint she is in- sisting on.
Waste, dubious projects and head counts are in her sights, with Cabinet ministers set for sore disappointment over their big spending dreams.
The benefits system is also on the chopping block, with a White Paper on how to slim down handouts and get people back to work due in the coming weeks.
Labour have bet the house on getting growth going and with their plummeting poll ratings already, Reeves better hope that banker is right
The Tories identified £12billion in potential savings there ahead of the election, but Labour sources suggest that was a little high.
Yet half that sum would give Reeves some much-needed breathing space — but there will be plenty of squealing from the Left.
Alongside the painful tax rises, it’s shaping up to be a Budget in three parts.
The Chancellor insists she will put “a ring of steel” around working people with measures to improve their living standards and protect them from the pain of tax rises.
Despite what officials may say, she would be wise to remember that a hike in fuel duty is a tax on working people as most commuters drive.
Secondly, where the spending taps will be turned on is a package of support for the NHS — but this will come with hefty caveats on reforms.
A source told me: “We are not just going to pour cash into that money pit strings free, and Wes Streeting has been told very clearly it only comes with reforms.”
Meddling powers
And thirdly, a final trick to trigger the treat of getting growth and wealth creation going.
How UK debt is calculated will be changed to allow tens of billions to be invested in infrastructure over the course of the Parliament, but still allow Reeves to pay lip service to her fiscal rules of having the debt coming down in five years’ time.
That extra borrowing will have “guard rails” around it with the Office for Budget Responsibility, National Audit Office and other associated three-letter acronym quangos given more meddling powers.
Allies of Reeves insist the debt plan was given the thumbs-up by big banks when they were briefed on it last week — promising a hike in public investment will drive the private sector to get spending too.
But the benefits of that will take years to be felt if it does anything to get Britain’s anaemic growth ticking up.
I hear one city bigwig told Reeves at their meeting last week: “What is the alternative to doing this? There isn’t one.”
Labour have bet the house on getting growth going and with their plummeting poll ratings already, Reeves better hope that banker is right.
CABINET ministers are grumbling that they are being forced into Tory-esque austerity by the lack of cash coming out of the Treasury.
But they are not going to get much truck with Rachel Reeves’ hatchet man Darren Jones.
The Chief Secretary, who is in charge of saying no to spending, is such a stickler for penny pinching that he even takes his work home.
He’s nicknamed his three kids Cost Unit 1, 2 and 3 and uses the loving term so much that some close colleagues actually have no idea what his children are really called.