There was a time when you’d find out directly from the chancellor of the exchequer what would be in the Budget; now, most of it is published in the newspapers days before. And so it is that we have a good idea of what Rachel Reeves will say on Wednesday, when she stands up to deliver the first Labour Budget in 15 years and the first by a female chancellor in British history.
We know, for example, that a number of taxes are going up: almost certainly employer national insurance, very likely capital gains tax, quite possibly inheritance tax. We know that borrowing will rise too: Reeves has tweaked her so-called fiscal rules to allow an additional £50bn to be invested in new infrastructure. And when it comes to day-to-day spending, we’re told that the NHS will be the top priority.
There will be some unpopular changes too: for example, the Government’s decision to raise the maximum bus fare from £2 to £3, in a move likely to drive up travel costs for millions of low-paid workers. And there will be ongoing arguments over Labour’s manifesto pledge not to raise taxes on working people, and whether increasing national insurance for business owners is compatible with that.
But for all the criticism she will face over specific changes, Reeves deserves credit for what she is trying to do in this Budget. The Chancellor had various options open to her in trying to plug the £22bn black hole she insists the Tories left her, none of them especially palatable. Should she slash spending to recoup some money, as George Osborne did with such devasting consequences between 2010 and 2015? Should she instead borrow much more to fix public services, and risk spooking the markets, as those on the left of her party would like? Should she jack up taxes to raise billions, but risk stunting growth?
Reeves appears to have opted for a sensible combination of all three. The plan seems clear: prioritise urgent investment in public services and new infrastructure to get the economy growing, and pay for it through a carefully-calibrated increase in taxes typically paid by those most able to shoulder the burden, along with a bit of additional borrowing and some budget cuts elsewhere.
Prioritising public spending is the right decision. Everybody can see that Britain’s services are failing. Ambulances queue outside emergency departments in which patients lie in agony on trolleys in corridors. Schoolchildren cram into classes that have never been more full. The elderly wait in vain for carers that don’t arrive. The police are told about a crime and are unable to do anything. Motorists and cyclists dodge potholes on streets increasingly resembling the surface of the moon.
The British state has stopped functioning to the standards we have the right to expect in a country as developed as ours. That will not be resolved in one Budget, but Reeves appears to have recognised that something needs to change. Investment where it is most needed is a vital start. The public knows this, even if political opponents and right-wing commentators will decry any additional tax rises. Polls suggest that more voters want functioning public services, even if their own taxes go up, than want immediate tax cuts.
Increasing some taxes to invest more in public services is not just the right thing to do – it’s the politically astute one too. Labour ministers know they will be judged, more than anything else, on the extent to which they have delivered the change they promised. If voters are to re-elect a Labour government, they need to start feeling better off – and quickly. Reeves recognises that. The reported decision to increase the minimum wage by 6 per cent – higher than the rate of inflation – will help over one million low-paid workers feel better off almost overnight. That is exactly the sort of positive change that people will notice.
But if the Government is to convince voters that the country really is finally on the up, boosting bank balances by a few pounds won’t be enough. People need to feel that it is also becoming easier to access a GP appointment, or get their children into a local school, or find a decent home. They need to see that police officers are actually turning up, that the country has a transport system beginning to work, that hospitals aren’t full. Fixing public services is a key part of the change that Labour promised. And that is going to need money.
It was not inevitable that money would be provided. After years of austerity, Rishi Sunak’s Conservative Party went in to the election promising to cut taxes to the tune of £17bn a year. With Britain’s public services in crisis, they would likely have had to slash budgets by dangerous amounts to fund their giveaways. Reeves is taking a much more sensible approach.
That said, there is a risk here. The Chancellor must avoid the temptation to just invest in the areas that will deliver the quickest and most tangible results. Chucking money at the NHS, for example, may help cut waiting lists in the short term but it will not solve the fundamental problems unless accompanied by a programme of modernisation and proper plan to fix social care. Similarly, local councils need a totally new funding formula to allow them to provide services, from maintaining roads to helping children with special educational needs, without constantly seeking more handouts from Whitehall. Short-term investment must not come at the expense of long-term change.
The Government has spent the summer warning us about tough choices and unpopular decisions to come in this Budget. Some have already been announced, no doubt more will be. But we cannot continue as we are. Everybody can see that the public realm is broken and that it cannot be fixed on the cheap. In that context, Reeves’s careful use of the tax system to get public services back on track is absolutely the right approach.
Ben Kentish presents his LBC show from Monday to Friday at 10pm, and is former Westminster editor