The Chancellor of the Exchequer, Rachel Reeves, has defended her party’s recent budget decisions, asserting that they align with Labour’s manifesto pledges. In her maiden Budget speech, Reeves brought to life the ruling establishment’s commitment to “social well-being.” She cited their vital decisions to reduce NHS waiting lists, eradicate child poverty, and tackle inflation as key to their current situation.
Labour’s manifesto makes some bold promises. They promise to not increase National Insurance, the basic rate of Income Tax, the higher rate of Income Tax, the additional rate of Income Tax and VAT. These commitments were lauded to bring real, tangible financial relief to households who are struggling with increasing costs of living. Critics are right to be concerned about another, much larger piece of this proposal — extending the freeze on tax thresholds. They claim that such a step could roll back essential commitments.
Reeves did admit that freezing tax thresholds would mean everyday people would have to pay a bit more. In her own words, “does mean that we’re asking everyday folks to pay a little more. She pointed out that this decision directly affects working Americans. She understood the kind of pressure that it would put on families’ budgets.
The Chancellor has argued that the Budget does not contravene Labour’s commitment. To her credit, she makes the case that these cuts represent a realignment, albeit painful, toward fiscal responsibility and inexcusable social injustices. Reeves framed these decisions as “equitable and responsible decisions,” focused squarely on reinvesting in delivery of important public services and protecting vulnerable communities.
Critics of the budget have focused on the painful cuts to working families. Helen Miller of the Institute for Fiscal Studies (IFS) sounded the alarm over declining household spending power. She noted that it has lack great national improvement. She pointed to a dramatic change from economic history. We managed well over 2% growth per year on average through each of those parliaments from the mid-1980s to mid-2000s.
The Labour party’s promise not to raise any tax rates is intended to calm the nerves of voters suffering from a deepening cost-of-living crisis. Many families are grappling with inflation and rising living expenses, prompting calls for more immediate relief measures. The Chancellor’s reassurances should be viewed with a healthy degree of scepticism, and how well these fiscal decisions will work out is yet to be proven.
As Labour makes its way through these fiscal waters, it will need to grapple with competing priorities of upholding social commitments while guaranteeing a stable economy. In the months ahead we hope to discover whether these “fair and necessary choices” really are in the public’s interest. We’ll learn about their impact on GDP growth.