Latest official statistics showed monthly public sector net borrowing hit £3.1billion last month. That’s a huge leap from last year’s £1.8billion and the highest July spend since 2021.
This was £3billion more than predicted by the Office for Budget Responsibility, and will only deepen the £22billion black hole Reeves claims to have identified.
Taxpayers now have even more reasons to dread her autumn Budget on October 30, which will batter us with a string of tax hikes and spending cuts.
Reeves will blame it all on the Conservatives but to close that gap, she has to make choices of her own. And her early ones shows where her priorities lie.
Labour has somehow convinced itself that most pensioners are comfortably off and ripe for a plucking.
That’s why Reeves felt brave enough to scrap the Winter Fuel Payment for 10million pensioners, a move that has sparked a massive backlash.
She also axed the proposed £86,000 cap on social care costs. As a result, even more elderly people will lose their homes to pay for long-term care fees.
At the same time, Reeves waived through inflation-busting pay hikes for public sector workers, including 14% for rail workers and 22% for junior doctors.
She hasn’t got anything in return. The cash isn’t tied to efficiency improvements or more flexible working practices.
And both unions involved – the BMA and Aslef – immediately started preparing for their next wave of industrial action.
Other public sector unions now see Labour as a soft touch, and are busily upgrading their own wage demands.
A string of high pay awards will only widen the UK’s black hole, forcing Reeves to impose yet more tax hikes.
It now seems almost certain that Reeves will increase capital gains tax (CGT) in October, to bring the bands into line with income tax.
She’s also expected to target inheritance tax. I’m convinced she will impose on IHT on unused pension savings on death. She might also tighten gifting rules.
Reeves could also hit grieving families with a “double death tax”. This could involve imposing both CGT and IHT on the same assets when somebody dies.
There’s a pretty good chance she’ll slash tax relief on pension contributions, too. While leaving public sector pensions wholly untouched.
Middle England is set for a fiscal bruising. That will delight class warriors on the left, who have been dreaming of this moment for years.
Yet we can’t pin all the blame on Reeves. It was the Conservative Party that ramped up taxes to a 70-year high. Labour is only building on its legacy.
It seems that whichever party is in charge, the result is going to be the same. More tax.
The big risk is that this triggers a vicious circle, where relentless tax hikes squeeze the life out of the economy, and kill this year’s recovery before it has taken hold. How will Reeves balance the books then?
After winter fuel shocker – see where Labour’s Rachel Reeves will tax YOU next.
