Why Rachel Reeves can no longer be Chancellor
DANIEL HANNAN
Rachel Reeves cannot remain as Chancellor of the Exchequer. What makes her unfit for office is not that she has raised tax, swollen the welfare budget or set the country on the path to economic ruin. It is that she has done all this in open contempt for the letter and the spirit of the promises on which she was elected.
A Labour Party that sold itself as anti-Corbynite, that stressed its technocratic credentials, that swore blind that it would raise only three smallish taxes, has ended up inflicting the highest taxes on us in our peacetime history and lying about why.
Lying is not a word to use lightly. All parties put spin on their policies, seeking to place themselves in the best possible light. All politicians quote figures selectively – as, to be fair, do most non-politicians.
There is a difference between small inaccuracies and major deceits. Reeves appears, for example, to have exaggerated her proficiency as a teenage chess player, much as she had exaggerated the seniority of her role at the Bank of England.
While fibbing about your early accomplishments might indicate a certain insecurity, most voters forgive it. Few, at any rate, see it as a resigning matter.
Deliberately lying about the state of the economy when you are Chancellor of the Exchequer is different.
Reeves came to office last year promising that she had a ‘fully costed, fully funded’ programme.
There would be no tax rises beyond the three identified in Labour’s manifesto: VAT on school fees, tighter rules for non-doms and a retrospective levy on energy companies – three taxes which added up, collectively, to an extra £8.6 billion a year.
Within weeks, Reeves had torn up that pledge and grabbed £41.2bn in what she assured us was a one-off. ‘We don’t need to come back for more,’ she said. ‘We’ve done that now, we’ve wiped the slate clean… It’s now on us.’
Indeed it is.
This winter, she came back for a further £26.6bn. That makes £67.8bn a year in extra taxes, not the £8.6 billion identified in the manifesto.
This, to remind you, from a Chancellor who, during the election, had said, ‘Let me be absolutely clear, all of our plans are fully costed, fully funded – no ifs, no ands, no buts’.
To whack up taxes after such promises is not a small fib. It is a heist. Reeves knew that there was no £30bn ‘black hole’. She knew that, on the contrary, there was a small surplus – albeit one created for the worst of reasons, namely inflation.
Inflation acts as a sneaky tax, transferring resources from savers and workers to the government. As the value of the pound falls, so does the value of your bank balance – and so do the government’s liabilities. At the same time, price rises mean higher VAT receipts.
Reeves could have used this small surplus to cut taxes and stimulate growth. That, after all, is what she kept claiming was her ‘number one priority’.
Instead, she decided to pitchfork the entire sum at welfare claimants. Not content with doing that, she raised a series of new taxes – taxes of the most growth-destroying kind, taxes that discourage investment and employment – to give them even more. The Budget raised taxes by £26.6bn while raising the annual welfare bill by £16bn.
You can’t keep squeezing the revenue-raising part of the economy to expand the revenue-consuming bit. Every working-age adult who joins the burgeoning number of sickness benefits claimants is, in accountancy terms, moving from the assets column to the liabilities column.
This is not spending to invest. Labour is not building new roads or schools. No, this is about trying to buy off the mass of left-wing backbenchers who still believe, despite the unprecedented expansion of the state during lockdown, that they are ‘fighting Tory austerity’.
Austerity? On the eve of the pandemic, the government was spending 39 pence in every pound, and the Office for Budget Responsibility was forecasting that the national budget would be in surplus by 2022. Now, the Government is spending 45 pence in every pound and borrowing £150bn a year.
When seven Labour MPs voted to remove the cap on child benefit last year, Keir Starmer took the Whip away from them. There had to be fiscal discipline, he declared. In any case, tackling child poverty was not about giving people handouts, for there was ‘no silver bullet’.
Now he dares to turn around and pretend that lifting the cap was his moral mission all along. Scrapping the two-child limit, he said, without a hint of irony or self-awareness, was ‘a moment of personal pride’.
It’s not so much the dishonesty that stings; it’s the credit he gives to our intelligence.
This is all about buying himself a few extra months – buying them with our money. Having campaigned as Tony Blair, he is governing as Tony Benn. Not because he was a secret Bennite all along, but because he dares not stand up to a bunch of new MPs, whose previous lives were largely in charities or quangos, and who are not prepared to cut a penny from our already bloated budgets.
This Budget has done for Labour: the three most recent polls as I write all have the governing party below 20%. Labour, we may be sure, will not recover. The question is, will Britain?
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This article (Why Rachel Reeves can no longer be Chancellor) was created and published by CapX and is republished here under “Fair Use” with attribution to the author Daniel Hannan
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