To say this wasn’t the plan is an understatement.
When Rachel Reeves said last year (and many times since) that she had no intention of coming back to the British people with yet more tax rises, she meant it.
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But now the question ahead of the budget later this month is not so much whether taxes will rise, but which taxes, and by how much? Indeed, there’s growing speculation that the chancellor will be forced to break her manifesto pledge not to raise the rates of income tax, national insurance or VAT.
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Her argument, made in her news conference on Tuesday morning, is that she is in this position in large part because of other people’s mistakes, primarily those of the Conservative Party.
But while it’s certainly true that a significant chunk of the likely downgrade to her fiscal position reflects the fact that the “trend growth rate” – the average speed of productivity growth – has dropped in recent years due to all sorts of issues, including Brexit, COVID-19 and the state of the labour market, she certainly bears some responsibility.
A problem that is some of her own making
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First off, she established the fiscal rules against which she is being marked by the Office for Budget Responsibility.
Second, she decided to leave herself only a wafer-thin margin against those rules.
Third, even if it weren’t for the OBR’s productivity downgrade, it’s quite likely the chancellor would have broken those fiscal rules, due to the various U-turns by the government on welfare reforms, winter fuel, and extra giveaways they haven’t yet provided the funding for, such as reversing the two-child benefit cap.
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Now, at this stage, no one, save for the Treasury and the Office for Budget Responsibility, really knows the scale of the task facing the chancellor. And in the coming weeks, those numbers could change significantly.
But it’s becoming increasingly clear, from the political signalling if nothing else, that the government is rolling the pitch for bad news later this month.
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Indeed, for all that this government pledged to bring an end to austerity, a combination of higher taxes and lower spending will be highly unpopular, not to mention deeply controversial. And while the chancellor will seek to blame her predecessors, it remains to be seen whether the public will be entirely convinced.
