In last week’s Budget Reeves stunned the nation by hitting us with £40billion of tax hikes and an extra £32billion of additional borrowing. It looked horrible at the time, and looks even worse today.
We’re already suffering blowback from her tax and spend spree. Instead of driving growth, as PM Keir Starmer promised, it appears to be destroying it.
Everything is heading south thanks to the Budget, with the notable exception of inflation. That’s going up.
On 15 May, one week before Prime Minister Rishi Sunak called a shock election, the FTSE 100 stock index was riding high and looked set to smash through 8,500 for the first time ever.
Today it’s sliding towards 8,000, as investors panic and sell.
The sell-off began the moment Starmer and Reeves took power and started telling everyone how hopeless the UK economy was.
Having sunk they stock market, they moved onto the economy.
GDP grew by a healthy 1.2% in the first half of this year, faster than any country in the G7.
Today, the International Monetary Fund forecasts it’ll grow just 1.1% across 2024. Which suggests that instead of growing in the second half of the year, the UK economy is going to shrink.
If true, that’s a lousy return on all the taxpayer cash Reeves is preparing to blow.
There’s bad news for jobs, too.
In the run-up to the Budget, Reeves floated a host of possible tax hikes, only to see them shot down one by one.
Eventually, it left her with just one option. To hike the amount of National Insurance (NI) employers have to pay when hiring staff.
This was a twisted way of avoiding breaking Labour’s pre-election pledge not to increase NI on working people. Companies are working out the cost and it’s huge.
The supermarket sector is a major employer and will be particularly hard hit. The NI hike will cost Sainsbury’s £140million a year, while Asda will pay an extra £100million and Marks & Spencer £60million.
Reeves also hiked the minimum wage, so we can basically double those numbers.
Imagine that repeated across UK employer. Labour has stripped £25billion out of corporate Britain. No wonder investors are pulling out of UK shares.
The left won’t care. They see big business as evil, rather than a source of jobs and growth. Or in the case of the supermarkets, keeping people fed and watered.
Workers will ultimately pay the price, as employers cut jobs or slow wage hikes to make the books balance. So Labour is driving our pay down too.
One thing is going up though. Inflation.
In September, consumer price inflation fell to 1.7%. Now the Bank of England is warning that Labour’s splurge will force it towards 2.5%.
It said inflation won’t fall back to its 2% target until 2027. So Labour has given the cost-of-living crisis fresh legs too.
Homeowners should be looking forward to cheaper mortgages, after the BoE cut base rates to 4.75% yesterday. But they won’t
BoE governor Andrew Bailey has warned interest rates will slow from here. Again, thanks to the Budget.
So far, Labour has been able to blame the useless Tories for the mess they inherited, but the Budget is all their own work. And it’s proving to be a disaster.