IF ONLY voters had listened to Rishi Sunak last year, the economy would today have been in a much healthier state. Inflation was about two per cent when he was ousted from office. As chancellor, Rachel Reeves has managed to double that.
The Daily Telegraph wants Reeves to resign, allegedly because she misled the country. She claimed the economy faced a black hole of £20–30 billion, but it has now emerged that Richard Hughes, chair of the independent Office for Budget Responsibility, told Reeves that “at no point” she faced a shortfall of more than £2.5bn. Hughes also confirmed that on October 31, the OBR upgraded its forecasts and told the chancellor that she, in fact, had a £4.2bn surplus. In other words, she stands accused of lying in order to justify her decision to raise taxes by £26bn.
Her two budgets make complete sense if her intention was to increase the number of Labour voters by making more people dependent on welfare benefits. At the same time, she sought to punish potential Tory voters by imposing VAT on fee-paying schools, for example, and driving out wealthy entrepreneurs. This will not help the economy to grow, but people dependent on welfare benefits are likely to support Labour at the next election.
I am not in principle against removing the two-child cap on families. If this encourages people to have more children, that might be good for a country with an ageing population. However, many people might feel there is no incentive to seek work when they receive more in benefits.
There is an element of truth in the latest Private Eye cover, which has Reeves declaring, “I’m going for broke!”
As things stand, prime minister Sir Keir Starmer faces a really tough choice. His instinct is to be loyal to Reeves, but he cannot win the next election unless he has a new chancellor capable of bringing about economic growth. One way to do that is to encourage the British Asian business community and take full advantage of the Free Trade Agreement signed with India. Of course, this is not the whole solution, but the prime minister could do worse than read the latest Asian Rich List. The communities secretary, Steve Reed, who came to the launch, will have a copy.
In his Sunday Times (30) column, Sunak said: “There’s no plan to tackle the alarming rise in welfare spending: from £314.7 billion in 2024-25 to £406.2 billion in 2030-31. The demands of an ageing population mean that we simply cannot afford to have more and more of the working age population signed off sick.”
He added: “It is far easier writing a newspaper column than being either PM or chancellor. But one thing that being out of office gives you is time to think – and it’s clear that as a country we face choices that cannot be ducked any longer. We can either reduce our debt burden and right-size the state, starting with welfare, and deregulation; or we can face ever higher taxes and borrowing and ever lower growth.”
