I have been an ardent critic of the economic growth and wealth creation policies of the current Government. To my credit, I was also a critic of the previous government.
So, it may surprise my readers if I float the possibility that Rachel Reeves might get it at least partly right at the upcoming budget, accidentally of course, and within the flawed framework of what the Labour Party is pursuing.
It seems to me that she has been on a journey during which the Treasury and OBR have guided her away from false assumptions but she has also persuaded her self that their orthodoxy is flawed and needs to be challenged.
If this combination plays out in the correct manner we might be surprised by the long term benefits to the functioning of economic policy making, albeit the overall philosophy of tax and spend, driven by the state, is fundamentally flawed and ultimately anti-growth.
The Chancellor appears to be backing off the idea that taxing the “rich” (largely people who have innovated, taken risks and worked hard) and realising that it is counter productive.
The Non Doms, who pay UK tax anyway, have left or are leaving, thus denying the Treasury of funds it currently enjoys at their expense.
An attack on “carry” in the equity sector would result in the same. A serious hike in Capital Gains Tax (CGT) would damage investment along with the housing market, pensions savings and possibly savings in general. All of these would be an attack on wealth creation and economic growth.
She also seems to have spotted that only general taxation will raise sufficient funds for the billions that Labour wish to raise in order to cover more state spending, fictional black holes and Net Zero madness.
Fortunately for the Chancellor she inadvertently forgot to promise not to tax employers National Insurance (NI). This will ofcourse, have a similar affect on jobs and wages as would have an employees NI hike.
Reducing reward, wages and pensions, or cutting jobs and thereby making people poorer, or adding to the cost of living passed on to consumers, all could result.
Most likely, there will be a squeeze on employment and wages. There is no such thing as a free lunch (or ticket, suit, holiday) as Mr Starmer knows! But even this will not be enough to fill the black hole now being created by Labour’s spending spree.
Ironically it may be that the Chancellor has discovered that UK public debt is not beyond the pale, despite Treasury orthodoxy, and will redefine the fiscal rules in order to increase borrowing.
The discovery that Treasury orthodoxy is not sacrosanct would be a major breakthrough. It would be even more impressive were she to divide the economics absent Treasury into a Public Purse Department, which it is now, and an Economic Policy Department, which is much needed and should have as its remit wealth creation and growth.
The Treasury is not fit for purpose and perhaps only a new Labour Chancellor can tackle this.
Cuts in public spending, in the size of the state, would be most welcome but unlikely, the Chancellor is after all a technocrat product of the state and the cabinet is absent of anyone with proper business experience.
What the Chancellor must not do is to cut nuclear development as it is our only way out of the Net Zero morass. She should really insist Mr Milliband is sacked and gas and oil production recommenced pending a nuclear solution, as the Net Zero agenda is the single, greatest threat to the country, her budget and to the success of Labour’s plans.
If the Chancellor gets away with an employer NI hike, extra borrowing and a squeeze on the state it will be a great escape for her and for Britain. It will damage economic growth however inflation is falling and interest rates are coming down.
If the result is also a period of certainty for business and the government start to talk Britain up rather than deploying toxic language and policies of envy, there is every chance we will continue to outgrow the EU’s core.
But it’s still early days and there are many things this Government can do yet to destroy the route to prosperity that they were handed on a plate.
John Longworth is an entrepreneur , businessman and is Chairman of the Independent Business Network of family businesses. He is also a former MEP.
