I don’t know what she expected. Applause for hitting the nation with £41.5billion worth of tax hikes at a time when taxpayers are already counting every penny?
Bouquets of flowers as reward for her decision to borrow another £32 billion to fund extra public spending for just one year?
Maybe she thought the bond market would jump for joy at the thought of having to fund £300billion of government borrowing this year, to plug the gap between what Britain spends and what it earns.
As I wrote yesterday, the Budget looked bad at the time and worse today.
Instead of lavishing her with praise, the Bank of England warned Reeves will cut growth and drive up inflation. That means fewer interest rate cuts, if we get any at all.
The UK stock market has tanked, as UK investors realise the damage that Reeves’ £25billion National Insurance raid is about to inflict on company profits.
Reeves will drive up the cost of employing staff and this will force companies to cut wages, slash headcounts or push up prices to recoup the cost.
This is all a disaster but there’s worse. By embarking on a tax-and-spend spree right at the start of Labour’s five-year term, Reeves has left herself no wiggle room if something goes wrong.
PM Keir Starmer and Chancellor Rachel Reeves have no room for manoeuvre now (Image: Getty)
She’s got just £10billion of fiscal headroom. In goverment spending terms, that’s pennies. The NHS could swallow it in a moment.
Now let’s say something unexpected comes along that requires a few tens of billion pounds in extra public spending.
I don’t know, like a pandemic or war or recession. They do happen.
Reeves won’t have the money. We are pretty much borrowed out.
Our borrowing costs are already rising and not just due to the Budget.
President-elect Donald Trump is preparing to boost the US economy by slashing taxes and red tape. That will boost growth in the short term but will also drive up inflation and interest rates.
Not just in the UK but here, too. Which will squeeze UK growth and drive the cost of servicing our £2.5trillion debt even higher. We already spend £100billion a year on interest payments. What a waste of our money.
If Reeves hikes taxes to plug the shortfall in the nation’s finances, that will backfire too.
Taxes will soon total 45% of total UK GDP. They’ve never been at these levels before.
Which brings me to Ed Miliband.
Labour’s Energy Secretary plans to spend tens of billions funding the transition from fossil fuels to renewables.
While climate change is a real risk so is Miliband’s goggle-eyed green push, as it’s likely to leave us even more dependent on oil imports.
His plan to spend £22billion on unproven carbon capture technology could prove money down the drain.
Money we haven’t got.
All it will take is one shock to push us over the brink. And with Trump in the White House, Putin in the Kremlin and Xi Jinping in Beijing, the odds are we’ll get one. Then all hell will break loose.
