Chancellor Rachel Reeves faces a day of reckoning that will have major consequences for families across Britain.
Confidence in her leadership of the Treasury will crash further if the Bank of the England downgrades the UK’s already pitiful growth forecasts on Thursday.
Voters and investors alike will conclude Labour is not working if the Bank cuts interest rates in an emergency attempt to inject life into a flat-lining economy while forecasting growth will be less than 1.5%.
Britain faced major challenges when she moved into Downing Street in July but experts are lining up to warn she has made things worse.
The trouble for the Chancellor is she cannot lay the full blame for the abysmal performance of UK PLC on the Conservatives. Employers are dismayed at her decision to hit them with a de facto tax on jobs, a huge mistake from Rachel Reeves.
The hike in National Insurance contributions – expected to raise £25billion – presents employers with an awful set of choices, all of which are bad for Britain.
Do they increase prices – potentially fuelling inflation – or do they cut back on jobs, training and investment?
Britain already suffers from low productivity and an endemic problem of worklessness. This will be even harder to tackle if the pool of relatively low-paid entry-level jobs dries up.
The combination of a rate cut and a growth downgrade, coming a week after Ms Reeves presented her a passionate champion of economic growth in her hyped-up speech, will be a painful reality check that will send out a sorry message to a watching world.
Global investors will have clocked AstraZeneca’s decisions to scrap plans for a £450million vaccine factory in Merseyside. The science minister may insist the sums “simply didn’t add up for the taxpayer” – but major companies will conclude that this is a Government one of their peers simply could not do business with.
The true danger for the country is that confidence is whittled away and unemployment climbs up. It is one thing for the Chancellor to face unhelpful growth forecasts; but when Britons start seeing neighbours, friends and siblings losing their jobs this stops being about lines on a graph and becomes a very personal crisis for every family affected.
Nigel Farage and his growing army of Reform UK activists will invite former Labour and Tory voters to find a new political home in their ranks. If the economy tanks further they will say neither of the traditional parties of power can be trusted to deliver the growth on which the survival of our public services depends.
Ms Reeves’s woes will get much worse if the Office for Budget Responsibility next month issues a further downgrade and sounds the alarm that increased borrowing costs mean she is in danger or breaking her fiscal rules – an event that could trigger market turmoil.
The Chancellor may find herself sitting at her desk facing the grimmest of choices – hiking taxes or taking the scythe to Government spending.
Labour went into the election with the mission of securing the “highest sustained growth in the G7” and a pledge not to “increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT”.
Ms Reeves may well feel boxed-in. Her desperate search for cash has already seen her snatch away winter fuel payments, clobber independent schools and ramp up inheritance tax on family farms – where else will she look for spare change?
She would do well to heed the advice of generations of doctors – primum non nocere: first, do no harm. Britain cannot cope with further tax raids and if she is serious about boosting growth she should do everything possible to help job-creators.