Labour shadow Chancellor Rachel Reeves is playing a high-risk, high-reward strategy. She promises to take on the pessimistic economic predictions the Office for Budget Responsibility (OBR) is required to publish next month. Reeves has a clear plan to address the UK’s most urgent economic crises. She wants to fight off the anticipated bad news and spare family finances from getting pinched even more by austerity.
Reeves had already committed to £40 billion of tax increases in her last Budget. Now, she too is under the cosh as she awaits for the OBR to announce it is downgrading the UK’s productivity performance by 0.3 percentage points. This downgrade would more than double a £20 billion hole in her tax and spending rules. She highlighted the need to focus on fixing the economic hand-wringing left by their Conservative predecessors. While she won’t preempt the OBR’s findings, she agrees that action is needed.
Those deliberations will be contained at the budget next month and I’m not going to pre-empt them. Reeves added, “I’m going to be frank—the productivity performance we inherited from the last Conservative government and the legacy of the financial crash has been too poor.
The Shadow Chancellor placed significant blame on Brexit and the lingering effects of the Covid-19 pandemic for the current economic predicament. She contended that taken together these three factors have severely punitive scarring effects on the British economy. Moreover, many of these working people feel ignored and even attacked as standards of living continue to climb.
“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,” Reeves asserted.
As she plans for the next Budget, Reeves has stated unequivocally that austerity is out of the question. There will be no going back to austerity,” she announced, adding that all future decisions taken would go towards fairness and need, not reductions in public expenditure. This position is surprising as households are still reeling from the effects of high food and energy prices.
These tax increases marked Reeves’s first big leaps towards his National Insurance Contributions for employers, controversial crossing the media fire line. Even with this, she has made it abundantly clear that she is “not coming back” for further tax increases. If the outlook for productivity were to significantly deteriorate, tax increases would be more likely. This is particularly the case if we exclude cuts to public spending or more borrowing from the public purse.
“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,” Reeves noted.
The Shadow Chancellor adopts a refreshingly proactive approach to addressing the UK’s economic challenges head on. They adamantly oppose a return to austerity, which many argue would simply compound the struggles families in every corner of the UK are already facing.