4) Labour is boxed in on tax
The theater around Monday’s speech is seen by many as an attempt to roll the pitch for potential, undisclosed tax rises in October, when Reeves will deliver her first budget.
And that’s what the Tories are arguing, too.
“She will fool absolutely no one with a shameless attempt to lay the grounds for tax rises,” Tory Shadow Chancellor Jeremy Hunt said in response. He argued that Reeves was already well aware of the black hole when Labour put forward its manifesto.
In her statement, Reeves reiterated her promise not to raise taxes on “working people” — which is a reiteration of Labour’s manifesto commitment not to hike income tax, VAT or national insurance, which funds certain benefits for workers and their families.
But other tax hikes are available, such as on profits from investments or on inheritance. The trouble is, such measures won’t raise anywhere near as much dosh as hiking the three taxes Labour have ruled out raising.
“It is unwise to take important policy levers off the table before knowing which problems will need fixing,” the IFS wrote in May. “Income tax, NI and VAT collectively account for about two-thirds of total tax revenue.”
“Ruling out increases in these biggest taxes doesn’t mean that extra revenue couldn’t be raised by other means. There are other taxes. But it’s a serious constraint,” the think tank added.
It is worth remembering too that the Conservatives cut national insurance in their spring budget earlier this year — the cost of which is in the billions. With their manifesto promise not to raise NI, Labour hasn’t countenanced reversing that cut — even though it would be a big revenue raiser.
5) Go for growth
Reeves used the statement to announce the next budget will be held on October 30, with a spending review published at the same time. That’s when the chancellor’s promised focus on growing the U.K. economy to cure some of Britain’s ills comes to a head.
It won’t be easy. Reeves is relying on policies like her National Wealth Fund, GB Energy, planning reforms and her pensions and investment review to get billions of private investment flowing into the U.K. economy to boost infrastructure, pension pots and bank accounts — and growth.
Economic growth is set to hit 0.7 percent this year, and 1.5 percent next, according to the International Monetary Fund — an improvement on what came before but still but nothing to write home about.
To achieve many of the Labour government’s aims Reeves needs to see growth at a level that will actually change the U.K.’s fortunes. But U.K. growth has been sluggish since the financial crisis — 1.3 percent in 2010, 2.1 percent in 2011 and 2.4 percent in 2012.
There’s lots to be done, and not a lot of time to do it.
