Rachel Reeves promises no return to austerity but I’m not so sure
There was a lot of talk ahead of Labour’s Budget about it being the most significant financial statement for decades. One that would set the course of our country for years to come.
After 14 years of Conservative Party underfunding that has left our public services in crisis, we needed a vision. But what we got was a patchwork of promises, barely delivering on the long-term change that people voted for in July.
Here’s what Chancellor of the Exchequer Rachel Reeves promised this week.
After a rush of spending over the next year, the increase in funding slows to a crawl.
A growth in real terms spending on public services of 1.5% a year after next year will barely touch the sides when you consider the need after 14 years during which public services have been brought to their knees.
This doesn’t feel like a plan for long-term transformation to build the economy of the future.
Don’t get me wrong: there was much to welcome. It was right that money is set aside to compensate the victims of the infected blood scandal and the Post Office Horizon scandal. It was also right that the Chancellor changed the self-imposed fiscal rules to allow more borrowing to invest in infrastructure.
But this was a Budget that too often gave with one hand and took away with the other.
While there is welcome and substantial investment in the NHS – mainly for diagnostic services – it comes in the wake of the withdrawal of winter fuel allowance for millions of pensioners, which will leave far too many unable to heat their homes and more vulnerable to falling ill. The money in the Budget for social care will barely touch the sides – hardly an example of joined-up thinking.
This was a Budget that too often gave with one hand and took away with the other
The funding for schools is also welcome and a recognition of the dangerous state of many school buildings, which were constructed with dangerous concrete. I was also pleased to see the Chancellor recognise the huge unmet need of families with SEND children, with a £1billion increase in funding – though I fear it is unlikely to be enough.
But let’s not forget that the Government also chose not to lift the two-child benefit cap, which condemns 300,000 children to living in poverty.
The minimum wage is going up but raising employers’ national insurance and lowering the threshold at which they have to pay it places a huge burden on small and medium-sized businesses, who form the backbone of our economy and provide more than 16million jobs. The rise in bus fares will also make it more expensive for the worst-off to get to work.
Then there is the vital green transition to a thriving, sustainable economy. In the past several Conservative budgets, the word ‘climate’ was mentioned barely at all.
Rachel Reeves continued that shameful tradition. The climate and nature crises have been virtually ignored – despite the huge impact they will have on our economy in the coming years.
Worse, the money to deal with some of the biggest impacts of climate breakdown – flooding – is to be reviewed and quite possibly cut.
As an MP for a rural constituency that is regularly affected by flooding, this is deeply worrying.
The Chancellor is planning huge rises in capital and day-to-day spending – particularly in the coming year – in the hope that a growing economy will help pay for it.
But she has ignored the reality of where the wealth lies in Britain. The wealthiest 10% of the population own around half of all wealth, much of which is taxed at an unfair rate compared to ordinary working people.
The Chancellor seems to run scared of all the talk about multimillionaires and billionaires leaving the country, rather than looking to them to pay a little more in tax so everyone can benefit from improved public services.
Yes, capital gains tax is going up but there is still a yawning gap between tax paid on income from work compared to income from wealth. The rise in employers’ national insurance contributions means the money to fund the increase in public spending is coming mainly from taxes on work, not wealth.
Rachel Reeves said there would be no return to austerity. But based on her plans, I’m not sure she’s right.
Do you have a story you’d like to share? Get in touch by emailing Ross.Mccafferty@metro.co.uk.
Share your views in the comments below.