Rachel Reeves’s speech in Downing Street this morning was highly unusual. Hearing a Chancellor make a speech outlining how difficult the environment is ahead of a Budget has obviously surprised the media.
Equally extraordinary were Reeves’s targets of blame for the current predicament. They were many and varied: from Brexit and Donald Trump’s tariffs, to – predictably – “years of economic mismanagement” by the last Conservative Government.
Governments always blame others for their own shortcomings. They generally do this immediately upon taking office – and Sir Keir Starmer’s Labour was no different. At the time of last year’s Budget, we were told that the exceptional tax rises were necessary to stabilise the economy after 14 years of Tory misrule.
At that time, Labour claimed to have inherited a black hole of £22bn from the previous Conservative Government. The Tories disputed that, but even if you granted Labour their figure, the £40bn tax hike which subsequently happened that November was significantly more than the black hole Labour originally claimed.
All should have been rosy. Reeves herself declared in November last year that she “did wipe the slate clean”. Yet a year later, the Tories are still being blamed, along with the mini-Budget, Nigel Farage and a host of other factors.
The Chancellor is good at blaming others for a gloomy outlook she herself has helped to create. Indeed, she will probably blame the Tories or Brexit or even the mini-Budget if she does break the manifesto promises Labour themselves made ahead of last year’s general election.
square KITTY DONALDSON Rachel Reeves's Budget could cost Labour the next election
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It was, however, the Labour Party and Reeves who pledged only last year not to increase taxes on “working people”.
They were good enough to specify which taxes they would not raise. They mentioned VAT, income tax and national insurance on employees as taxes they would not increase.
When they made that commitment, they knew about Brexit, they knew about the Tories’ record, and they were certainly aware of – and had brutally weaponised – my mini-Budget.
Only this September, the Chancellor used the “changing world” as an excuse. “Well, look, I think everyone can see in the last year that the world has changed, and we’re not immune to that change,” she said on BBC Radio 4’s Today programme.
Today, the Chancellor is on the verge of definitively ripping up her manifesto pledges. Asked directly if she would raise income tax, she declined to deny it and said instead that she “wants people to understand” the challenges she faces.
Of course, when you are forced to renege on promises, the easiest option is to blame everyone and everything – the Tories, Trump, Farage, the world economy, whoever else – for the humiliating U-turn you are about to make.
Trying to deflect responsibility from yourself is an age-old trick of the political world, even if it is one too crude for today’s media savvy electorate to swallow; they will quickly conclude that it makes the one doing the finger-pointing look even more shifty – and once a politician’s credibility is gone, it is extraordinarily hard for them to get it back.
Blaming others so obviously seems to voters like an excuse for essentially going back on your promises. It is unlikely to cut much ice with them.
square KWASI KWARTENG Rachel Reeves doesn't understand the rich – that's why her Budget will fail
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It would perhaps be better simply to apologise – and do so in an act of genuine contrition. That is more realistic and believable than simply trying to put the blame on other people, like a schoolchild who has been caught out: “It wasn’t me, Miss!”
The real reasons for this predicament are, of course, the difficult economic situation. More specifically, it has been the lack of growth and the consecutive downgrades to growth forecasts that have created a black hole. Lower growth means a lower tax take for the Treasury than planned – suddenly, we see a yawning gap open between the Government’s spending commitments and the money it has to fulfil them.
On top of lower growth forecasts, we have also seen an inability to reduce that Government spending. The failure of the Government to introduce welfare reforms, despite having a working majority of nearly 160, is part of the reason for this likely tax hike.
Labour MPs will be asking themselves if this really is the end of the tax hikes and the beginning of a period of sustained growth. Their fear will surely be that, if growth doesn’t come, Reeves – or, as seems increasingly likely, her successor – will simply increase taxes next year.
This would be a manifestation of the very same doom loop – low growth leading to increased taxes leading to low growth – which Labour MPs themselves denounced in opposition. It would be almost impossible for the Government to be re-elected against that backdrop, never mind the inevitable accusations of broken promises which would follow.
For Starmer and Reeves, this is a nightmare which has only just begun. The political left is now fractured into the Greens, Jeremy Corbyn and Zarah Sultana’s nascent party, and the pro-Gaza independents.
Starmer badly needs a theme to rally these voters back to Labour and away from its challengers. But even so far away from a general election, it is likely too late for this.
A more probable scenario – and one which will no doubt have occurred to No 10 – is that Labour MPs will grow mutinous and turn on the Prime Minister and his Chancellor in a vain bid to save their own skins. If and when that were to happen, they will have nobody to blame but themselves.
Kwasi Kwarteng is a former Conservative MP. He served as chancellor between September and October 2022 under Liz Truss
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