Rachel Reeves had a difficult task: she had to please her backbenchers, comfort bond markets, sustain the promise of faster UK economic growth and stick to a plausible version of Labour’s manifesto commitment not to “increase national insurance, the basic, higher, or additional rates of income tax, or VAT”. The Office for Budget Responsibility had also made achieving all this far more difficult by at last recognising that it had long proved too optimistic on future productivity growth. A plausible judgment is that the chancellor did not make things worse. But she did not make them very much better either. Not least, there is much at risk in a Budget that, according to the OBR, offers higher public sector net borrowing in every year before 2029-30 than it forecast last March. This underlines the absurdity of targets that bite years ahead.
Yet one must also have great sympathy with Reeves’ critique of the governments that preceded hers. The mistimed and misshaped austerity from 2010, Brexit and, not least, the Liz Truss “mini” Budget are hard to forgive. But it is, alas, clear that this government does not have the nerve or, surprisingly, despite its apparently huge majority, even the ability to make radical pro-growth reforms. It is, as this Budget also shows, “Old Labour” in its attitudes to incentives and growth. Yes, investment matters. But it is not all that matters. The increases in the costs of hiring and the upcoming difficulties in firing are bound to affect both growth and jobs, precisely the things Labour professes to want.
