Nigel Farage and Kemi Badenoch’s duelling speeches in split screen TV appearances gave us an early glimpse into how their response to next week’s Budget will play out.
Both accused Rachel Reeves of mishandling the economy and failing to control public spending amid a spiralling welfare bill, leaving the Chancellor with no option but to raise taxes. Never mind the red-on-red attacks from her own Labour Party, this was the right (almost) uniting to sock it to the Government.
With just a week to go before Reeves stands up in the Commons, Labour has demonstrated a masterclass in chaos, uncertainty and worry for voters.
Reeves made her dramatic breakfast speech a fortnight ago to signal she was willing to break a manifesto pledge and raise income tax. The plan, while unpopular, did at least have some advantages. It demonstrated to the money markets she was determined to bring down debt – or at least give herself greater headroom. But her U-turn last week at the behest of her backbenchers – amid a welcome financial boost from revised OBR numbers – did nothing to allay market fears that there is no proper plan to shore up wobbly public finances.
After the Government scrapped plans to trim welfare expenditure by £5bn following a rebellion by its own MPs in the summer, Labour’s credibility with the markets was already falling. Having now taken broad-based tax rises off the table too, Reeves is left trying to balance the books with what the Treasury dubs a glamorous Swedish “smorgasbord” of smaller tax increases. But this is not the finest dill-dusted smoked salmon; it’s the fiscal equivalent of curling sandwiches and hardening hummus: only pick them if you’re desperate.
Some of this greying picnic includes freezing income tax thresholds, ending tax breaks for salary sacrifice pension schemes, a new tax on electric vehicles, a tax on higher-value properties, extra taxes on landlords’ income from rental properties and a gambling tax.
These options might be more appetising than raising income tax, but are less effective at curbing inflation. The plans also risk targeting businesses already smarting from higher employee national insurance contributions and soaring energy costs.
Reeves’s fiscal position is now even more precarious because Labour MPs believe she will scrap the two-child benefit cap at the possible cost of up to £3.5bn a year, even as her biggest revenue-raising proposal has been withdrawn. Under widespread pressure from backbenchers – led by senior colleagues including Education Secretary Bridget Phillipson and Labour’s Deputy Leader Lucy Powell – the Chancellor has apparently accepted she will have to find the money to scrap the cap.
Which is all very helpful for the Leader of the Opposition, who has consistently said the country can’t afford changes to the cap. Rehearsing what will be one of the Tories’ Budget attack lines, Badenoch said on Tuesday: “Labour are raising taxes to pay for Keir Starmer’s weakness on welfare cuts.” The Conservatives have said they would reinstate the cap, a policy they think will be very popular with the “working people” whose interests Reeves had vowed to defend.
At a time when the Government keeps stressing the strain public finances are under due to years of Tory austerity, finding several billion to scrap a policy that is broadly popular with the public may seem like an unwise move. According to the latest polling from YouGov, 59 per cent of the public are in favour of keeping the cap in place and only 25 per cent think it should be abolished.
This is a genuinely distinctive offering, positioning the Conservatives differently not only to the left-of-centre parties but also to Reform UK, which has yet to nail down where it would make domestic cuts and backs ending the two-child benefit cap. But Badenoch also refused to curb ballooning spending on pensioners. Older people have “paid in”, Badenoch said, in justification of inflation-busting increases to the state pension.
Farage has recently dropped 2024 election campaign promises for broad tax cuts, after criticism that the sums didn’t add up – and pivoted to a more cautious fiscal message, focusing on spending instead. He wants to restrict the two-child cap to working parents.
At his Tuesday press conference, the Reform leader claimed he could save £25bn a year by exclusively targeting foreign nationals. He promised to cut £10bn by capping foreign aid at £1bn per year, to save £5bn by increasing the standard immigration health surcharge from £1,035 to £2,718 – and a further £6bn by stripping foreign nationals of the ability to claim universal credit (UC).
Farage’s argument is that rather than raising taxes in the Budget, foreign nationals should “bear the brunt” of any action to repair the public finances. The most arresting of Reform’s savings is the pledge to end UC payments to foreign nationals, including European Union citizens. Doing so would break the terms of the Brexit withdrawal agreement signed with the EU, potentially resulting in retaliatory trade restrictions. Challenged on this point, Farage airily dismissed such concerns, saying that Europe continued to sell cars and champagne to the UK.
Badenoch dismissed the idea of extracting further concessions from Brussels as “living in la-la land.” Farage “does not really know what he’s talking about”. she said, arguing that Reform misleads voters when it says “it would be so easy to just walk in and tell the European Union what to do. It doesn’t work like that, and it is wrong of him to deceive people.”
In both opposition parties’ news conferences, there were strong 2013 vibes making the distinction between those who go out to work – and those who used to be dubbed “shirkers”. The two-child benefit cap epitomises differing attitudes on the left and right to what is just. Labour MPs don’t think it’s fair children should live in poverty through no fault of their own. Tories don’t think it’s fair workers should be taxed more to pay for a burgeoning welfare bill.
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Unusually for a politician, Badenoch also invoked God – even though she is no longer a believer herself. She sought to draw a direct line from the Government’s failure to pass welfare reform to the coming tax rises, arguing “not cutting benefits and allowing the welfare bill to spiral is not a Christian thing to do” and that unless welfare is cut, the country faces bankruptcy.
Badenoch has come under heavy pressure to up her game, with the polls showing Reform consistently in the lead. When asked if she was copying Farage’s strategy of holding frequent press conferences, she argued when she announces measures “we make sure our policies are robust and would stand up to scrutiny, that is not the same for Reform”.
However much Farage may be soaring in the polls, next week Badenoch is the one – as Opposition Leader – who has the dubious honour of responding immediately to Reeves’s Budget. With next to no time to prepare her response in a noisy House of Commons, expect welfare to lead her riposte. You saw it this Tuesday, first.
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