It’s unlikely to be good. None of the news Rachel Reeves receives these days is positive. Every time fresh figures land, they highlight the mess she’s made of the UK economy in just over a year.
Whether it’s rising inflation, rocketing debt, soaring borrowing costs, slowing growth, out-of-control spending or plunging business confidence, it all lands on her desk at No 11 with a gloomy thud.
The UK economy has been sinking under a sea of bad news ever since the financial crisis in 2008. Labour or Tory, it’s all heading south.
The problem with Rachel Reeves is that she’s accelerated the process by arrogantly making all the wrong choices.
Instead of supporting businesses to deliver the growth she desperately needs, she’s chose to tax them into oblivion with last year’s £40billion Budget raid. She’s also thrown billions at the public sector, much of which will vanish into pay rises, without demanding any productivity gains in return.
This is Labour ideology in action, and once again, it’s failed the reality test. Yesterday, she’ll have had confirmation of that.
Reeves was handed a two-page A3 document from the Office for Budget Responsibility (OBR), the watchdog whose forecasts she’ll use to frame her Budget on November 26.
It’s simple in appearance but potentially lethal in effect. The key number sits at the bottom of the second page under the heading “fiscal headroom”.
Reeves will have jumped straight to it, because that single figure will seal her fate, and ours. It shows how much money she has left after taking tax and spending plans into account, and it’s likely to be pretty nasty.
Consensus suggests a £30billion shortfall, which she’ll almost certainly have to fill with tax hikes. Some experts are gloomier still.
JP Morgan economist Allan Monks reckons Reeves could be forced to find another £50billion to £80billion of tax rises over this Parliament.
That’s on top of the £50billion he estimates she’s already imposed. This would potentially lift her total take to a record-breaking £130billion. Assuming she stays in post that long which frankly, looks unlikely.
The killer number is the OBR’s productivity forecast. The watchdog is expected to downgrade its long-term growth estimate by 0.1 or 0.2 percentage points, which doesn’t sound much but could cost Reeves between £9billion and £18billion a year in lost tax receipts.
This slim sheet of paper could sink her entire Budget strategy. Yet for now, Reeves will be keeping her secret under wraps. We might get a clue when Reeves next appears in public. She doesn’t exactly have a poker face.
Unless she can find deep spending cuts, which Labour backbenchers won’t tolerate, she’ll be forced to plug the gap with more tax.
Nobody knows which taxes she’ll target, despite all the speculation. That’s because Reeves and her Budget architect, Torsten Bell, are still working it out. But they now know what they’ve got to play with, and it’s not much.
Reeves has the numbers. We don’t. All she can do is make the best of them, while the rest of us can do is wait and worry.
