Where’s the vision, Rachel?

Labour would say it’s a Budget that is repairing the damage that the Conservatives left behind, both to the public finances and to the services upon which Britain relies. Labour is spending to repair school buildings, fund the NHS, compensate victims of scandals (both the infected blood scandal and the post office IT calamity), and more.

Both of them have a point. There is much in the Budget that is technocratic and sensible. Policy wonks will appreciate changes to how the government will set its fiscal rules in future, what it will use as its main measure of borrowing, and changes to eliminate tax loopholes for hedge fund bosses, non-doms and on inheriting agricultural land (increasingly a tax trick used by billionaires, not farmers).

Labour can point to lots of good, small, fixes: it will sanction people on Universal Credit less, alleviating some child poverty. Carers can now work for longer each week without losing carers’ allowance. Local authorities can keep 100% of the revenue when they sell off council houses. 

There are modest increases to defence spending. Labour’s YIMBY contingent will be pleased with, if not delighted by, £5bn of spending on housing. Labour’s transport nerds will be pleased with, if not delighted by, HS2’s route extending to Euston (if not the north).

But Labour didn’t promise to come in and pass a few sensible policies. It got elected on a mandate of change, and it got elected promising that it would finally deliver economic growth for Britain – it would invest, grow Britain’s economy, and use that new revenue from growth to fix public services.

That is emphatically not the Budget that Rachel Reeves just delivered. Growth was supposed to be the north star of the new government, but the OBR forecasts that Rachel Reeves read out during the Budget were lower than those Jeremy Hunt read out just six months ago.

Reeves is asking the public not to compare the two: she says the OBR was misled in March about how bad the public finances were, so the comparison isn’t fair. That’s the kind of detail the public don’t care about. Labour got elected promising to bring growth to the British economy, and their very first budget seems to have abandoned that goal. 

This comes despite the government announcing tens of billions of extra public investment over its term. The problem is that the way they’ve decided to raise taxes might be politically clever – it doesn’t come directly from pay packets and isn’t directly on working people – but it creates a triple whammy on businesses that will doubtless hurt job growth and thus economic growth.

Reeves announced a record-breaking increase to minimum wage for under-21s – from £8.60 an hour to £10 – and a 6.7% rise in the over-21^st minimum wage to £12.20, which is overall a welcome policy and one that could boost the UK economy too: lower wage workers are much likelier to spend their wages, creating growth, than higher paid ones (who often throw it in a savings account).

But someone has to pay those wages, and businesses are getting whacked. Sectors that employ a lot of low-paid workers will have to find the cash not just for the minimum wage hike, but also for an extraordinary hike in workers’ national insurance. That is increasing from 13.8p for every £1 of salary to 15p for every £1. 

But crucially, the threshold at which it must be paid is dropping – from £9,100 to £5,000, meaning that places employing lots of part-time workers will see astronomical hikes in their NI bills. A part-time staffer working minimum wage for 15 hours a week currently incurs no employers’ national insurance. After this budget, they’ll cost just over £600 a year in NI alone.

A full-time minimum wage worker, meanwhile, will cost their employer £1,400 more a year in higher wages and £890 more in national insurance. 

The knock-on effects of that will be profound: fast food chains and supermarkets will accelerate their plans to automate away jobs through self-checkout and automated warehousing. But care homes and nurseries – who already operate on extremely tight budgets – don’t have those options. Without extra targeted help, childcare and social care could collapse. Councils, too, may have cause to worry about their outsourced services.

Rather than face a confrontation with voters over reversing Rishi Sunak’s unaffordable national insurance giveaways before the election, Labour has created £25 billion of new taxes on jobs, felt first by employers, but whose knock-on effects will be felt by everyone – and unlike simply reversing Sunak’s cuts, the blame for this will fall on Labour. Both the IFS and the OBR say that this will hurt household income.

Labour decided to stick with the letter of its promise on income tax, national insurance and VAT rather than pick a political fight. It similarly shied away from doing anything about fuel duty – despite petrol at the pump costing the same now as it did ten years ago (can you say the same for any other product?).

Rachel Reeves has extended the “emergency” fuel duty cut by another year, and done what every Tory chancellor has done since 2010 by cancelling the supposed planned hike in fuel duty that was supposed to happen this year. 

Those steps alone have cost £7 billion – but at the moment we are supposed to believe that next year she will actually end the “emergency” fuel duty cut and allow the planned hike to happen. But if she won’t increase fuel duty now, why are we supposed to believe she will ever do it? If she doesn’t, that’s an extra £20 billion or more she’ll need to find in future budgets.

That giveaway to motorists could have funded a continuation of the £2 bus fare cap that Labour is increasing to £3, and it could likely also have fully funded an end to the two-child benefit cap. Or it could have meant Labour didn’t need to means-test the Winter Fuel Allowance. 

Despite its rhetoric, Labour seems determined to avoid making any necessary but difficult political choices. It has not actually prioritised growth, and it has not prioritised help where it is most needed. 

By avoiding those tough choices, it has left itself picking from worse decisions with worse outcomes that might not be as obvious to voters. 

The budget lacks coherence: it is trying to make the numbers add up so that it can find money for the most pressing problems in a way that doesn’t create immediate political backlash. 

It is a managerial budget, not a visionary one. Gone is the hope for a new Britain, replaced with the hope that a better-functioning NHS and some more investment will be just sufficient to offset the hit on growth caused by the tax hikes – and that the result will be enough to appease voters who want better than we’ve been getting. 

If the government had been in power for several years, you’d accuse it of losing its way. As it stands, it just looks like it never had much of a vision in the first place.

Labour is, in essence, doing exactly what it said it wouldn’t: it is betting the farm on throwing a load of money at the NHS. More than half of the new taxes it has introduced are going straight to the NHS, in new day-to-day funding. 

Despite its repeated claims that there wouldn’t be more money for the NHS without reform, the budget contains a huge amount of money for the NHS, while the reforms will come later, once Labour has worked out what they are.

As it is, the NHS is getting more than £20 billion in extra funding next year without having to do anything concrete for it. This is in essence doing for the NHS what Liz Truss tried to do for the economy: Truss offered tax cuts first, and said she’d announce the reforms to make it work later. Labour is announcing extra NHS spending now, while promising to announce reforms to make sure it’s spent well later.

The NHS certainly needs the money, and few voters will be unhappy to hear it’s getting it – but the NHS is a notorious money pit, and if the service doesn’t get better then the backlash could come fast.

That puts a lot of pressure on Wes Streeting. Labour has all but given up on the “white heat of technology” and seems to have resigned itself to growth of less than 2% for its whole term – and that’s before any nasty surprises. 

Despite its promises that no worker will see more tax come out of their pay packet, they know that household incomes will be hit by its tax hikes. This is a budget with a lot of tax and nearly as much spending, but it’s not transformational: it is hoping that incremental improvement will do it.

Health, and the NHS, is the only department that’s been given a truly significant amount of extra cash. Keir Starmer, and the Labour government, need it to deliver. No pressure, Wes.