The first hint came yesterday afternoon. As Rachel Reeves finalised her Budget speech she was pictured beneath a portrait of Labour’s Ellen Wikinson, Clement Attlee’s working-class education minister. It was a political changing of the guard – “Red Ellen” (a founding member of the British Communist Party) has replaced Nigel Lawson in the Chancellor’s office.
Today’s Budget was notable as the first to be delivered by a woman (an 800-year wait). But it was also one of the most class-conscious in history.
Though Reeves cherishes her status as a former Bank of England economist, she used her speech to draw sharp political dividing lines. Private schools, she confirmed, would pay VAT from next January, reminding the House that “94 per cent of children in the UK attend state schools”. To emphasise the point, as she faced the Winchester-educated Rishi Sunak, she recalled: “my sixth form was a couple of prefab huts in the playground.” (It was the condition of schools during the Thatcher era, Reeves has often said, that prompted her to join the Labour Party).
The other losers from the Budget were just as clear: large farm owners (inheritance tax relief for farms will be capped at £1m), private equity bosses (the tax on their profits will rise from 28 per cent to 32 per cent), non-domiciled taxpayers (the status will be abolished from April 2025), capital gains taxpayers (with the higher rate rising from 20 per cent to 24 per cent) and, as Reeves noted with a nod to Sunak, private jet users (Air Passenger Duty on them was increased by 50 per cent).
The winners, the Chancellor insisted after much derision, were “working people”. Labour, she declared, had kept its manifesto pledge not to raise income tax, VAT and National Insurance on them. The latter can be disputed on economic grounds: a tax on companies is ultimately paid by workers (employers’ NI will rise from 13.8 per cent to 15 per cent).
But Reeves hopes the politics will favour her: only a third of voters are actively opposed to the measure and they do not regard it as a manifesto breach. Labour’s new emphasis on protecting employees’ “payslips” is designed to sharpen the contrast between work and wealth. The minimum wage, Reeves announced, would be increased by 6.7 per cent to £12.21 an hour and she hailed Labour’s radical expansion of workers’ rights. Combined with the highest public investment since Harold Wilson, this amounts to a clear shift away from New Labour’s political economy.
Though the Chancellor’s team insisted in advance that “the era of rabbits is over”, the Budget contained a few lapine-like creatures. Income tax thresholds will rise in line with inflation from 2028-29, fuel duty will again be frozen and draught beer duty will be cut by 1.7 per cent (knocking a penny off a pint). Such measures are targeted at the lower-middle class swing voters who decide general elections – and who defected from the Tories to Labour.
In pursuit of the same group, Reeves unashamedly increased taxes by £40bn to better fund public services. The tax take will now reach a record high of 38.2 per cent of GDP while day-to-day NHS spending rises by £22bn (the biggest increase, outside of Covid, since 2010). This was a redistributive Budget of the kind that Gordon Brown, Reeves’ university hero, delighted in delivering: the Red Book shows all groups except the top 10 per cent will benefit.
The Chancellor used her peroration to deploy Brown’s classic dividing line – challenging the Tories to match her spending plans (or stand accused of plotting cuts). But this is Brownism with a class-based twist. After being criticised for attacking “old school tie” elitism at Oxbridge, the former chancellor largely refrained from this battle. Today’s Budget was a reminder that Reeves has not.
[See also: Labour has imposed a £19.5bn stealth tax]
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