The Chancellor and the Prime Minister are, the PM has said, “in lockstep” when it comes to the Government’s mission. Unfortunately, the backbenchers on whose votes they rely are marching to a rather different beat. That leaves all of us with a big problem.
The Government has a thicket of missions, goals and priorities – above all of which was meant to come one: growth.
A precondition for growth, Rachel Reeves and Keir Starmer know, is averting a market crisis. They were bluntly reminded by the bond market jitters after the welfare rebellion that this country is dangerously indebted. That’s why the cost of borrowing spiked when it seemed the Government was unable to control its costs, and that even trying might cost the Chancellor her job.
In truth, this is what underlay the crisis that struck the Truss Government, too. Markets don’t hate low taxes or deregulation, but they were frightened that the mammoth energy guarantee, paired with plans to reduce tax revenues being announced before plans to cut spending, amounted to yet more national debt.
Those from whom this country borrows fear that we have already borrowed as much – or more – than we can afford, and they will charge danger money if it looks like we intend to do more of it, or if we are unwilling to reform to improve our chances of paying it back.
The welfare rebellion was a signal to Reeves and Starmer that they can no longer do whatever they like. They are therefore in “lockstep” on a shrinking list of things that they might actually be able to implement.
The tools at their disposal are now rather sparse. Welfare reforms are off the menu, and meaningful NHS reforms, supply-side economic reforms, and changes to improve public sector productivity are unlikely to clear the Commons either.
The Chancellor is effectively being told that she must still balance the books, but can’t reduce spending. If spending can’t go down, and borrowing ought not to go up, then the only other lever available is tax rises.
That means tax rises on the middle classes – on workers, on savers, on entrepreneurs. Ominously, these are the very same groups, dubbed “Grafting Realists” and “Striving Moderates”, whom Downing Street strategists identify as the key to their re-election prospects.
At this point, Starmer and Reeves’ worry shouldn’t be that they might not win these people’s votes – it’s that they might break them entirely.
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Think of what this group already bears. They work hard for limited returns. Their incomes have stagnated for years on end, while the cost of living has gone up and up.
For those in employment, the employers’ national insurance rise is destroying tens of thousands of jobs and eating away at salaries. For those running businesses, the tax hike is just the latest threat to their survival.
New regulations are coming down the line, which will place even more pressure on small and medium employers – the Federation of Small Businesses reports that more companies expect to shrink or close this year than expand.
Now, the middle and upper working classes must sit and watch Parliament refuse to countenance any change to the welfare system, relying instead on an implicit assumption that the taxpayer can simply cough up yet more instead.
And they must wearily consider a raft of plans to sting them further. A stealth tax by freezing tax thresholds yet again; more taxes on savings; potentially a massive cut to annual tax-free ISA limits; maybe a tax raid on their pensions; possible increases in employers’ costs. On and on it goes.
Now, consider what they get in return.
They abide by the law, but watch others get away with breaking it. They go to the supermarket and pay their bill, while organised gangs of shoplifters stuff holdalls with goods and just walk out the door.
They get on the train, bus or tube and pay their fare, while others barge through unchallenged to travel for free. Once aboard, they have learned to keep their heads down amid videos blaring on mobile phones, or foul-mouthed antisocial behaviour, for fear of the aggression that meets any request for basic civility.
If their home is burgled, their phone snatched, or their child mugged, they have precious little expectation of any justice should they file a report. They pay hefty motoring insurance, while 300,000 uninsured drivers take to the road every day.
Their dreams of what they might achieve if their efforts pay off continue to be crushed – VAT on independent schools pulls up the ladder for those who hoped to scrape and save just enough, retirement looks as far off as ever, and the lack of housebuilding means their kids are increasingly stuck at home until their thirties.
So far, they’ve stuck with it, hoping that their lifetime of dutiful hard work will pay off. They are living a life that they believe to be moral: passing up a dodgy quick buck or the satisfaction of selfish indulgence to do the right thing by their children, their neighbours and their country.
You might, somehow, think it’s right to squeeze these people more – to compel them to give up more and more for less and less in return. Or you may, like the Chancellor, think it’s simply necessary to balance the books. In either circumstance, how confident can we be that they will be able and willing to bear it?
Their dedication, ethos and sweat have kept the show on the road, carrying an over-indebted, inefficient state, and a low-growth society this far. But that isn’t an invitation to squeeze them yet further. Push them past breaking point, and our problems rapidly get far worse.
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