Busted over her 'economist' lie - but should Rachel Reeves resign?

Economist says Reeves’s Budget travels in the right direction – but slowly

The Mainly Macro economist says Reeves’s Budget travels in the right direction – but slowly.

That might be a big enough mistake to ruin the Labour government though, according to Professor Simon Wren-Lewis.

He tells us:

As most of the media will attack this budget for increasing taxes to ‘record highs’, without appearing to give a moment’s thought to why taxes are rising to record levels in most countries, it is natural to be defensive of it.

It is, after all, much better to travel in the right direction, albeit slowly, than to keep on going the wrong way.

However, the political danger of moving gradually, in part because one hand is tied behind your back (no tax rises on working people), is that you disappoint those who are naturally impatient to see improvements in public services across the board.

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A political environment where voters know taxes are rising but where problems in public service provision (including child poverty) continue to fill the headlines is not a comfortable one for any government, because it raises issues of competence in voters’ minds (where is the money going?).

Equally risky is continuing to try [to] flatter the marginal voter (or petrol user!) when you are in danger of losing your political base.

I suspect, once the immediate and rather predictable political controversy is over, this budget will be seen as the minimum that could have been done, and that something bolder might have been less risky in the longer term.

The comment about flattering petrol users is a reference to the freezing of fuel duty again, on which he also states that he had previously referred to “tax increases that the Conservatives had pencilled in which Reeves could cancel, but doing so would only make her job harder.

“Fuel duty was one of those, and here Reeves has not only decided to not increase the duty yet again (on a day after floods generated by climate change killed dozens in Spain), but is in danger of continuing the Conservative practice of planning future Fuel Tax increases but never implementing them. Depressing.”

Most telling, perhaps, is his comment about public spending. After all Reeves’s – and prime minister Keir Starmer’s – protestations that there would be no return to (or continuation of?) austerity, it turns out that they aren’t reversing it at all.

Instead, Prof Wren-Lewis states: “No additional austerity compared to where we are now, but no attempt to return spending to the levels needed to restore the public services to the state they were in just before austerity began in 2010.”

But he adds: “If that seems a little disappointing, it is worth remembering two points. The first is the extent of additional austerity implied by the inheritance Reeves received, all to enable unsustainable tax cuts. Avoiding that required the budget undertake substantial tax rises and considerable additional borrowing.”

And he suggested – in defiance of some commentators: “Reeves has in most cases been relatively modest in the increases implemented this time. That leaves scope for further increases in spending matched by higher taxes, if necessary, in later budgets.”


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One Comment

  1. Jeffrey Davies November 4, 2024 at 6:32 am - Reply

    I see the many pay for the few another way that we all pay that is the peasants don’t tax the healthy isn’t life strange that a toerag in a redtie taxes the poorer in society yet they had a chance but didn’t take it

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