DANIEL HANNAN:
This dishonest and vindictive
Budget has finally killed the
aspiration of Thatcherism
DANIEL HANNAN: This dishonest and vindictive Budget has finally killed the
aspiration of Thatcherism
By Daniel Hannan
Published: 23:47 GMT, 31 October 2024 | Updated: 00:23 GMT, 1 November 2024
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For four decades, Britain was, by European standards, a pretty competitive
place. Taxes were lower than in neighbouring countries, the employment market
freer, the national debt under control.
All that ended on Wednesday. Rachel Reeves ' budget will come to be understood
as the turning point, the moment when the post-1979 consensus was abandoned.
The state is being expanded, not because of a war or a pandemic, but for its
own sake.
Whether ministers truly believe in the effectiveness of big government, or
whether they simply want to be popular by pumping money into public sector pay
and pensions, the effect is the same. The private sector – the bit of the
economy that generates wealth, jobs and tax revenue – will be extorted and
brutalised to the point where growth stops.
Before considering the full impact of Britain's counter-cyclical return to
socialism, it is worth noting that the budget was also vindictive and
dishonest.
Vindictive because it targeted groups whom Labour dislikes: savers, employers,
private school parents – and above all farmers, many of whom now fear that
their children will lose the family business• Экономика » Бизнес at their deaths.
Rachel Reeves ' budget will come to be understood as the turning point, the
moment when the post-1979 consensus was abandoned
Daniel Hannan says that Rachel Reeves tax-bomb budget was also vindictive and
dishonest
The revenue being squeezed from some of these groups is, in the scheme of
things, trivial. Becoming the only country in Europe• Физико-географические регионы » Европа where education is taxed
will, on the government's figures, raise less than £1.5 billion – and that
assumes that none of the parents who can no longer afford fees will work
shorter hours or retire earlier, which would, of course, hit tax revenues.
Read More
Use our interactive calculator to find out how much more YOU will pay after
Reeves's tax bomb Budget
But aspirational parents, like the farmers being clobbered by inheritance tax,
rarely vote Labour. They are being punished to pay public-sector workers who,
by and large, do.
Labour's dishonesty is even more striking than its vindictiveness. Reeves
promised, up to and through the election, that she would not fiddle the rules
to borrow more. Now, with our national debt already at 100 per cent of GDP,
she has done just that.
She kept telling us that there would be no taxes beyond the three flagged in
her manifesto, namely VAT on school fees, a levy on energy companies and
changes in the status of non-doms. As she put it at the start of the election:
'Every line in our manifesto will be fully costed and fully funded. No ifs, no
ands, no buts.'
Once the election was out of the way, she switched to saying that there would
be no taxes 'on working people'. There was a minor hoo-ha about who counted as
a worker, but let's take the most basic definition: someone with a job.
By choosing to load her increases on to National Insurance• Страхование, Reeves has found
the one tax that falls solely and narrowly on working people. She might be
deliberately trolling us. How did her manifesto put it? Oh, yes: 'Labour will
not increase taxes on working people, which is why we will not increase
National Insurance• Страхование.'
Sure enough, the OBR has confirmed that three-quarters of the rise will be
absorbed by workers through lower wages.
No wonder Rishi Sunak sounds so angry. He was mocked throughout the election
for saying that Labour's taxes would amount to £2,000 per family. Supercilious
'fact-checkers' lined up to dismiss him. Yet, three months in, the bill per
family has come in at £2,342.
To justify that betrayal, Labour MPs have been told endlessly to repeat the
words '£22 billion black hole'.
But no one is falling for it. According to the OBR, the Treasury was claiming
£9.5 billion (not £22 billion) in unfunded spending commitments, and it could
not verify even that lower figure: 'It is not possible to judge how much of
the £9.5 billion additional pressures identified from the information provided
by the Treasury would have been absorbed and offset by other savings,' the OBR
review said.
No wonder Rishi Sunak sounds so angry. He was mocked throughout the election
for saying that Labour's taxes would amount to £2,000 per family
Then again, the whole concept of a black hole is absurd. Governments are not
obliged to pay state employees more, or indeed to hire more of them. Those are
choices. A government decides how much to spend and must fund its spending
through either immediate taxes or deferred taxes – that is, borrowing. This
week, Labour decided to take the already bloated post-Covid state and expand
it further. It is doing so through both immediate taxes (£36 billion a year)
and deferred taxes (£32 billion a year in extra borrowing).
Read More
ANDREW NEIL: A seriously socialist Budget that dooms Britain to another lost
decade
With lockdown behind us, we should be looking to return spending closer to
where it was in February 2020. Instead, Labour has chosen to firehose cash at
a public sector whose productivity is still 6.8 per cent down on pre-lockdown
(when civil servants were occasionally seen at their offices).
We are missing the epochal nature of this shift. For four decades after 1940,
Britain retained a model designed during, and largely for, a mobilised
economy. Taxes and spending were high, trade unions were powerful, industries
were run by the state and growth was sluggish. We were, in the cliche of the
time, the sick man of Europe• Физико-географические регионы » Европа » Больной человек Европы.
Then came Margaret Thatcher• Объект человек » Персоналии по алфавиту » Персоналии на Тэ » Тэтчер, Маргарет, and Britain went from being the slowest-growing
economy in Western Europe• Политика » Геополитика » Западная Европа in the 1970s to the fastest-growing in the 1980s
(other than Spain, which was bouncing back from an even lower place under
General Franco). Simply by letting the private sector grow faster than the
state – public spending actually rose slightly in every year she was in office
– Thatcher brought taxes down to below 30 per cent of GDP, a level closer to
the US than to Europe• Физико-географические регионы » Европа.
Now, following Labour's Budget, taxes are set to rise during this Parliament
from 36.4 per cent of GDP to 38.2 per cent – the highest level since the
immediate aftermath of the Second World War.
Though, as economist Milton Friedman• Объект человек » Персоналии по алфавиту » Персоналии на Фр » Фридман, Милтон used to say, the real tax rate is what
the government is spending, since it has to collect sooner or later. And that
stands at an incredible 45 per cent of GDP.
Under Margaret Thatcher• Объект человек » Персоналии по алфавиту » Персоналии на Тэ » Тэтчер, Маргарет, and Britain went from being the slowest-growing
economy in Western Europe• Политика » Геополитика » Западная Европа in the 1970s to the fastest-growing in the 1980s
The Thatcher reforms survived Tony Blair• Объект человек » Персоналии по алфавиту » Персоналии на Эн » Блэр, Тони and Gordon Brown• Объект человек » Персоналии по алфавиту » Персоналии на Бр » Браун, Гордон. They survived the
global financial crisis. They might even have survived lockdown, had the
previous government's retrenchment plans been kept on track. But Labour,
without the excuse of a pandemic, has thrown all that out of the window. And
we will soon feel the effect.
We have become used to a growing economy. That will change. Even the OBR says
the Budget's net• Страхование » Нетто impact will be negative, and the Growth Commission reckons
that growth will be 3.4 per cent lower during this Parliament than it would
have been without the Budget – a hit that will cost the Treasury around £50
billion in lost revenues.
We have become used, too, to falling unemployment. But the combination of the
National Insurance• Страхование hike with yet another above-inflation increase in the
minimum wage (which will make it almost impossible for firms to hire interns,
usually the surest route into steady work) will see that trend reversed. And
that is before we factor in Angela Rayner's new workers' rights, including
possibly the right to a four-day working week.
We are returning to the pre-Thatcher economic model – just at the moment,
ironically, when Europe• Физико-географические регионы » Европа is going in the opposite direction, throwing socialist
parties out of office in country after country. We are doing so, not because
we have lost a war or been robbed of some valuable resource, but because
Labour is opting for policies that always and everywhere make nations poorer.
God help us.
Lord Hannan is president of the Institute for Free Trade.
Labour
Премьер-министр Великобритании в 1997-2007 годах Браун, Гордон
Премьер-министр Великобритании в 2007-2010 годах Тэтчер, Маргарет
Премьер-министр Великобритании в 1979-1990 годах, 1925-2013. Фридман, Милтон
Американский экономист, обладатель премии по экономике памяти А.Нобеля, 1912-2006.
