Like millions of people, I enjoy an occasional flutter although at the opening fixture at Fakenham racecourse I failed to pick a winner. I was there to support the sport’s campaign against the government’s planned hike in tax on racing. This would have damaging consequences for a sport that is part of our community and heritage and put jobs in Norfolk and across the country at risk.
Rachel Reeves may not strike you as a gambler but she certainly placed a big bet in her Budget a year ago. She left herself barely any headroom in the figures needed to meet her new borrowing rule and it seems simply hoped for the best. That was irresponsible. Due to her decisions on spending, leading to interest rates staying higher for longer, and national insurance hikes stopping growth she is set to lose that bet. The only question now is how much she will have to find to meet her “ironclad” rules.
Of course, she doesn’t have to find the expected £20 billion or more from higher taxes. Indeed, she promised last year that the Budget was a once in a generation to wipe the slate clean and she would “not be coming back for more.” However, all the speculation over recent weeks has been about potential taxes she is looking at when she breaks that promise.
An extension of the freeze on income tax thresholds beyond 2028 looks inevitable – and there’s even talk of an increase in rates. Capital gains tax being charged on the sale of the family home is a possibility. As are new property taxes and a savings tax by cutting the ISA limits. Perhaps she will end the long-standing freeze on fuel duty.
The impact of this uncertainty is clear in the conversations I am having with constituents and businesses. Investments are put on hold, firms are stopping hiring, and the housing market has gummed up as people worry what 26 November will bring. Increasing taxes further would likely further depress growth and private sector investment making the public finances worse and seeing more borrowing.
A better way would be to control public spending as we have to live within our means. Yet Labour is set to spend five hundred billion pounds more over this Parliament than the plans they inherited from the last government. Spending on welfare health benefits is set to hit £100 billion by the end of the Parliament. The cost of paying interest on the national debt is £100 billion and would be the third highest spending department. Fraud and error costs £55-80 billion a year alone according to the independent watchdog.
At our party conference we set out an alternative approach. Our plans would deliver savings of £47 billion including £23 billion from welfare reform to help more people into work. Sadly the government looks to have backed off any changes which will mean people being written off and not get the benefits of work. We would save £8 billion from cutting the size of the civil service to pre-Covid levels. And targeted changes we proposed, such as scrapping stamp duty, would boost growth and the housing market.
In three week we will know which course the Chancellor has chosen to take. Let’s hope she has learned from the mistakes she made a year ago. I wouldn’t bet on it though.
