Or so Rachel Reeves, the UK’s Shadow Chancellor of the Exchequer, is hell bent on ensuring. She will need to overcome continued dark predictions on the state of the UK economy. The new government now finds a rift in public finances deeper than previously expected. What’s been most impressive has been her unwillingness to take the easy route of raising taxes on the public to meet those challenges.
In her last Budget statement last autumn, Reeves announced tax increases of £40 billion. Employers have already been hit by a recent increase in National Insurance Contributions. Opponents claim that such a shift would discourage business investment and ultimately, job creation. While recognizing the hard economic times, Reeves doubled, saying, “I’m not returning” for additional tax increases.
Reeves acknowledges the hurdles facing the economy, saying, “Our country and our economy continue to face challenges.” Public spending and borrowing has a lot of experts up in arms. They warn that tax increases are almost inevitable unless cuts or new borrowing are found. Despite all that, Reeves is adamant about sticking to her principles on spending.
The Office for Budget Responsibility (OBR) is set to lower its productivity forecasts by 0.3 percentage points. This amendment would further increase the harmful financial burden. This unexpected reverse will result in almost £20 billion hole in following Reeves’ precious tax and spending rules. She stresses that the reduced productivity performance is a direct result of the previous Conservative government’s policies. Add to that the double whammy of the Brexit impacts and the Covid pandemic and you have a perfect storm.
“Those conclusions [by the OBR] will be delivered at the budget next month and I am not going to pre-empt them. But I am going to be candid now that the productivity performance we inherited from the previous Conservative government and since the financial crisis has been too weak,” – Rachel Reeves
Reeves has been particularly outspoken on the pressures families are feeling with the rising costs of food and energy on household budgets. Many families continue to feel the strain of a cost of living crisis, prompting her to declare, “I don’t need a spreadsheet to tell me that too many working people in Britain feel the economy is unfair and does not work for them, with the cost of living still bearing down on family budgets.”
As inflation and economic uncertainty persist, the UK’s major supermarkets have warned that food prices may increase further if additional taxes are imposed on the sector. This dire forecast is deeply concerning, especially considering the forecasted additional burden on households that are already facing serious pressure on their budgets.
Reeves has come under fire for her record of raising taxes. Many stakeholders claim that these increases have significantly discouraged business investments and prevented new job creation. She remains firm in her belief that her decisions reflect necessary choices for a fair economic landscape. “These decisions and the decisions I will take at the Budget don’t come for free and they are not easy, but they are the right, fair and necessary choices,” she stated.
Given these conditions, Reeves has already rejected a return to austerity budgets. Her view is that austerity, combined with a slapdash Brexit and the pandemic, has doggedly scarred the British economy. All of these reasons still plague its ongoing recovery.
The federal government is preparing for new budget announcements. Rachel Reeves’ fiscal conservatism and her desire to address the immediate crises facing the economy. Her commitment to avoid further tax rises while navigating through difficult financial waters will be closely monitored by both critics and supporters alike.