Reeves was unlucky to inherit a fiscal black hole from the Tories, but everything she’s done since has only made it deeper. They say you make your own luck in life, and that’s certainly the case here. Reeves has made mistake after mistake.
Her biggest was promising not to raise the big three taxes before the election – income tax, national insurance and VAT. That left her scratching around for other ways to fund the £40billion she wanted in her last Budget.
Being Reeves, she landed on the worst of all: a jobs tax. She clobbered businesses with £25billion in extra costs, which they passed onto customers through higher prices.
Inflation jumped from 1.8% to 3.8% in a year, dragging out the cost-of-living crisis and driving up borrowing costs.
Many firms also stopped hiring or simply gave up the ghost. As a result, unemployment rose from 4.1% in July last year to 4.8% today. And it’s heading for 5%.
None of this was down to Brexit, Donald Trump or Tory austerity, as she pretends. It was down to her.
Talking down the UK, splurging on the unproductive public sector, the winter fuel payment shambles and disability benefits U-turn number among her greatest flops.
The result? Growth has stalled, the national debt is rising, inflation is the highest in the G7 and so are our borrowing costs. That’s all on her.
But yesterday, for once, Reeves got lucky.
The September inflation figure remained steady at 3.8%, lower than the 4% markets expected. The upshot? Ten-year gilt yields fell to 4.4%, their lowest since December, as traders bet inflation had peaked. That might just allow the Bank of England (BoE) to cut rates again in December by 0.25% to 3.75%.
It should also trim the massive £110billion a year interest bill on Britain’s £2.9trillion national debt. That might save Reeves a billion or two.
UK inflation is still a disaster of her own making. It’s almost double the BoE’s 2% target, and far above the eurozone’s 2.2%. And her luck won’t last. She’s about to squander it.
Pensioners, homeowners and savers are braced for another hammering in the Budget on November 26. Businesses are terrified she’ll hit them again, destroying yet more growth and jobs.
The IMF already forecasts that Britain will grow more slowly than any major economy next year. Another brutal Budget will make that a reality.
But Reeves will do it anyway. She can’t cut spending, as the IMF wants, because mutinous Labour MPs won’t let her. So she’ll line up another tax blitz instead. Yesterday’s little bit of luck will be long forgotten by then.
In fact, she may already have used it up.
The dip in gilt yields may have come too late to be included in the Office for Budget Responsibility’s forecasts, the ones she’ll base her Budget sums on.
That could force Reeves to go in even harder, triggering an even bigger backlash. And the BoE may not cut rates in December, because they don’t believe she’s got inflation under control.
Like I said, you make your own luck and Reeves will quickly blow through hers. As ever, taxpayers will pay the price.