Rachel Reeves just blew up UK economy far more than anyone realised | Personal Finance | Finance
The chancellor used that black hole to justify a brutal £40billion tax raid in her maiden Budget, and another £30billion in the next. The result? Consumers stopped spending, businesses stopped investing and sentiment collapsed as everybody waited for the worst. Reeves promised us all growth but kiiled it stone dead. It’s what Labour chancellors do. They tax and spend until there’s no money left.
Reeves also banged on about her so-called iron-clad fiscal rules but they made no difference. Parliament is packed with more than 400 Labour MPs who only want to talk about squeezing taxpayers harder to spend more on benefits and the public sector. Ultimately, Reeves knuckled down and did their bidding. So what happened to that £22billion black hole she claimed to fear so much?
The Office for Budget Responsibility simply had no idea of the scale of the crisis Reeves was about to unleash. In March 2023, more than a year before Labour took office, it forecast borrowing of roughly £85billion for 2024/25. Thanks to Reeves, the actual figure exploded to £151billion. That’s an extra £66billion in a single year.
In March 2024, again, before the election, the OBR innocently forecast borrowing of £87billion for 2025/26. Instead, Reeves borrowed around £152billion. That’s £65billion more than the OBR thought likely or even humanly possible. In just two years, Reeves borrowed roughly £131billion more than the country’s official forecaster expected. These are astonishing sums. Scarcely believable. I think it’s fair to say she’s gone loopy.
I don’t blame the OBR. It made those projections in good faith before anybody understood the sheer scale of the fiscal wrecking ball Reeves was about to swing. Voters didn’t see it coming either. If they had, Labour would never have got anywhere near office. And that isn’t even the worst part.
Reeves has also piled on more than £70billion in extra taxes. Instead of closing the deficit, all that’s done is blow it wide open. Labour loves taxing anything that moves but never seems to grasp that actions have consequences in the real economy. Investment falls. Growth weakens. Jobs disappear. Deficits rise. National debt climbs. Bond yields surge and borrowing costs spiral higher.
Reeves is crushing growth from two directions at once, yet still insists her “plan is working” and she’s “restored stability”. There’s no plan, and no stability. How can she keep a straight face while feeding us these whoppers?
And she won’t change course. She’s set to borrow another £149billion this year. Yet Labour MPs are still trying to bring in Andy Burnham to spend even more. The Treasury constantly blames “a war we didn’t start” (it means Iran) and rising global instability. But governments always face external shocks. The Conservatives had to cope with Covid and the Ukraine energy crisis. I don’t recall Reeves cutting them any slack.
