If reports are true, the budget decisions have been concluded, and Rachel Reeves has sent her workings to the Office for Budget Responsibility for them to consider. Now, all we have to do is wait for a Budget that has been tortuous in its gestation and which might very well profoundly disappoint and even alarm despite that fact.
We do not know what Reeves will do, although there are hints.
First, some form of increase in employer's national insurance contributions is likely. If her aim is growth, this is a spectacularly poorly targeted rise since this does have a direct impact on the intention to employ people. Such is the consequence of making rash (for which, read stupid) promises on actions that would not be taken on tax increases prior to the election, all of which are likely to have to be abandoned eventually.
We also know that an increase of some sort will happen on capital gains tax, but it will be modest, and Reeves has ruled out the use of ideology when it comes to tax decisions because she says pragmatism rules as if politics is a decidedly dirty word that she would never wish to go near. I wonder if she has forgotten what her job actually is, or has she, like so many neoliberals, simply decided that there are only singular options that are permitted and that, as a result, politics has ceased to be?
Thirdly, we know many ministers are very upset by the demands made on them by Reeves and have written to Keir Starmer to say so. As the FT reports this morning:
Prime Minister Sir Keir Starmer on Wednesday joined forces with chancellor Rachel Reeves to face down a cabinet revolt over plans for “grim” curbs to public spending next year.
They added:
Government officials said Whitehall departments covering local government, health, justice, defence, transport and environment were among those facing the toughest financial challenge. One said the planned spending curbs were “grim”.
So much for the story that there will be no more austerity: there is very clearly going to be just that. These ministers have already realised that being in office with Starmer and Reeves in charge is not all it was ever cracked up to be. The anger will be real, and that can only grow.
Fourth, there will be a change to the fiscal rules, but who cares? Whatever is announced will not be complied with anyway because they never are. That change will amount to nonsense to permit tiny amounts of additional investment that will be far below the amounts required.
And that is what we know, and probably all we need to know. We are going to get a deeply neoliberal budget from a politically inept Chancellor that will please no one, including her own Cabinet. There will be no growth as a consequence. A recession is more likely, especially if interest rates remain far too high. As that unfolds, the weak grip Keir Starmer already has on power will become ever harder to maintain. His own party will have had enough of him, and it is from there that his demise, and that of Reeves, will be engineered.
Reeves looks perpetually tired these days, no doubt as a result of sleepless nights. The stress of her role has already, very obviously, got to her. Her best moment was at the Labour Party conference. It was always going to be all downhill from there. October 30 will be her first budget. I would not rule out it being her last.
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Iron rule number 1
No child is going to go to bed hungry at the end of this Governments period in office
Iron Rule 2
Nobody is going to be sleeping rough at the end of this Governments period in office
Very good
Very nice ‘iron rules’, but also easily solvable by other, more Caligula-like means.
They’d need to be backed up by complementary iron rules to prevent that.
Any fool can make fiscal rules, but it takes a leader who understands MMT to know when to break them.
“Reeves looks perpetually tired these days, no doubt as a result of sleepless nights”
I’m sure Wes Streeting has a pill or injection for that…
Alternatively a cynic might say that all those sponsors, donors, financiers, offshore corporations and secretly funded thinktanks demand a lot of schmoozing, wining and dining, which can knacker anyone…………
Sounds about right Richard
Reeves lied about austerity
Quelle surprise
Who would have guessed
Well just about everyone reading this blog would have done.
I think the local elections next year will see the back of Reeves as virtually nothing will gave changed since the Tories were in power.
Two years further on there will be the last round of locals before the next general election that’s when starmer gets sacked.
Leaving Labour just 18 months to stop farage.
I think they have blown it already.
Bloody grim outlook but can’t see any alternative unfortunately.
The Greens’ deputy leader Zack Polanski is out there giving us one, witness his recent interview with Ian Dale where he came right out and pointed out govt creates money https://x.com/i/status/1846192533585432997
Economic literate Twitter is lining up behind him offering support.
He reads this blog…
Yo Zack! – this will be useful! https://www.economania.co.uk/various-authors/where-money-comes-from.htm
“Reeves looks perpetually tired these days, no doubt as a result of sleepless nights. The stress of her role has already, very obviously, got to her.”
Zero sumpathy, this is all self inflicted. As blogs on this site have pointed out, ad nauseum (squared), she has plenty of alternatives.
Her inability to even recognise alternatives shows that she is unfit to………..run a corner shop (& would probably be lousy at that).
All that said, the LINO (dis)information machine will doubtless spin it all (Mandelson in charge of the top) as necessary/needed/responsible/”grown-up economics” (TM) etc.
I despair, this govt is financially clueless, has no principles, no core beliefs, nothing.
they let noney markets dictate their course of action, they listen to billionaires & mega corps, they do not heed warnings of a disaster in the making, which will lay the foundations for a return to an even worse tory govt than the last.
I have no idea what to do. I am so worried & angry all at the same time! How can they be so thick? (no economic clue) so unfeeling? (bedroom tax) so greedy (freebies etc) so beholden to the pro-israel lobby, they darent make a real dent in their stream of weapons aiding a genocide. Wont consider any action for fixing brexit.
who is a better bet? obviously not the tories! the libdems? the greens? any one else capable of winning & forming a govt? cue more despair….
Contrary to received wisdom, the supposed ‘rule of the money markets’ is a fairy story intended to impress/frighten a financially and legally ignorant populace – i.e. it is simply a political choice.
Like all properly constituted markets, the money/financial markets operate within a framework of law set down by Parliament. They cannot ‘punish’ wayward governments, but governments can allow such a fiction for political convenience. Shame on us for letting them play this ruse. Meanwhile, the city – not the City – burns down as we fiddle!
Labour needs to address the root cause of the problem: Brexit, the enormous annual shortfall it has caused in the public finances, the inflationary pressures due to trade friction and the workforce shortages.
The impact is too big to ignore or to try and fix with taxation alone.
If we don’t find a way into SM and CU we will need to increase our year on year tax burden only to make up for the revenue shortfall caused by Brexit.
This is clearly unsustainable and has only one possible outcome: the end of the welfare state.
Much to agree with
What is to be said? What is to be done? As suspected prior to the election neither Starmer or Reeves are up to the job. They are clueless and incompetent. As for ‘the Tories left a mess’ – indeed but they have no idea as to how to sort it! The BBC does not help – yesterday on the world at one we had various fantasists talking about ‘the black hole’ and how to plug it and also Law talking about the need for austerity after 2010. Not surprising that business confidence is falling. Its pretty ridiculous to say the least. As for the old refrain that we need to pay politicians enough to attract the right sort of people – well thats not working is it!
A question for you Richard – if a business employs people who do not pay NI, I assume that that business therefore does not pay NI to the government for those employees? If that is the case it introduces a degree of unfairness in that if business A pays NI because it employs people above the threshold and business B does not have to pay because its employees are below the threshold, the latter gains an advantage in the market.
Re your question – you have to employ people on very low wages not to pay NI – and on a very part time basis.
This is not an issue of concern – exceopt for the people not getting an NI credit
Let’s see if Cabinet ministers have the guts to reject any such budget. And maybe local councillors (of any Party or none) resign en masse in protest at govt failure to fund them (& public services) properly. What would happen then?
As Richard has already stated, Reeves talked herself out of a job before a single vote had been counted. Hemming herself in with neoliberal fiscal nonsense meant she had zero options once she actually had to do the job.
Elsewhere we have Starmer, Kendall, Cooper and Streeting exciting Tory’s with their disabled, immigrant and NHS bashing. Yes, Cooper abandoned Rwanda, but not on humanitarian grounds. I doubt tbh, if any of Starmers inner circle know what the word means.
Education is not going to see any changes, and like the majority of depts needs more money not less. It’s not rocket science to see that a flagging economy and cuts go together, and merely serves
to confirm that successive govts simply don’t care.
As long as the ‘medicine’ on offer suits the City, and the rhetoric aims to pleases right wing voters that they simply aren’t convincing, no matter how brutally they act, New Labour will carry on blindly heading towards the dustbin of history..
The problem with New Labour blindly racing for the dustbin of history is that it will reinforce the opposition parties’ wishes that Labour is a spent force and that there will be no room in the future for a left party. So many people were taken in by Starmer’s lies and truly believed Labour would be better than the Tories and better than this. It’s frightening thinking that there is no real Labour/left alternative.
This is exactly, and already clearly, the problem. Labour, like many Social Democratic partys across Europe abandoned its core principles in the post Soviet era, and adopted neoliberalism. This has meant that electorates, which traditionally looked to the opposition to provide a relief from right wing ideology, are no longer receiving any.
Despite the sneering of Liberals at the very thought, this failure to offer real alternatives is what is letting in the Far Right. Backed by millions pouring in from the USA, where the religious right has phenomenal resources, and billionaire supporters and funders (the Koch brothers for example, dip deep into their pockets), the far right is better organised, better funded, and more powerful than at any time since the war.
The stupidity of ‘mainstream’ politicians, in trying to play the far rights game, while continuing with policies that enable them, really is staggering. Or is it, as some claim, they really just don’t care?
@Neil, I recall a time when Labour politicians were so scared of offering opinions about policy that challenged Margaret Thatcher’s skinning of the post-war consensus that its whole lexicon changed.
They really believed that they were never going to ‘take power’ again unless they agreed with Thatcher’s obscene attempts to change the status quo and sell off as much of the public services sector as possible.
While people are being asked to pay off the debts of utility companies it is staggering that they can’t see, or won’t be told, what has been done and what they are supporting!
Reform UK is already lining up candidates for the local elections next May.
Watch out Labour! You’ve been sussed and the landslide majority in Westminster may well be a hard shell on the top of a far right takeover beneath.