It was, of course, a great gamble. You don’t get to leap out of a long period of national underfunding and poor conditions for workers, without taking risks. For all Rachel Reeves spoke of stability (probably the word she repeated most often in her Budget speech) this was a giant game of chicken with the private sector.
The argument that has been made by the New Statesman for so long, which is that there is no point in electing a different government if it doesn’t try to take a different course, stands. Britain has tried the low-investment, profit-taking, give the boardrooms what they want experiment for a long time; and it has not worked.
So when the Chancellor defended her decision to raise £25bn from employers’ National Insurance contributions, defiantly pointing out that companies can’t operate successfully without healthy, well-educated employees and customers, she was absolutely on the money.
But here we come to the greatest risk. Although there has been a lot of focus, inevitably after the Liz Truss disaster, on the reaction of the bond markets to the sharp increase in borrowing to rebuild Britain’s corroded and patched-together infrastructure, Rachel Reeves is probably going to get away with this. Not least because rather than loosening the five year borrow-only-to-invest rule, she has tightened it.
The bigger question now is the reaction from tens of thousands of employers and boardrooms to the combination of the workers’ rights agenda, the higher NIC payments and the hike in the national minimum wage. Is it all just too much, all at once? Will it persuade them to stop hiring, to retrench, and to sit things out? If so the impact on growth – so desperately needed for this government to succeed – could be grim. The forward inflation figures look excellent. The forward growth figures are anaemic. If there is trouble ahead, this is where it starts.
The investment in the NHS, and for the poorest families, is very welcome. But many departments, given a 2 per cent savings and productivity target, have an eye-wateringly difficult time ahead. Labour MPs are asking privately whether this is a Treasury Budget, completed without much political pushback from the rest of government; or a genuine Labour Budget?
On health service spending, private school VAT taxes, council house spending and the spread of green energy investments, Reeves was trying hard to show her political chops. Her attack on the Tory record was one of the most ferocious things I have seen during a budget debate and had Jeremy Hunt mouthing desperate protests as she spoke.
There is nothing green about maintaining the fuel duty freeze but by doing that, taking a penny off pints in pubs, and above all, refraining from more “fiscal drag” (the lucrative business of drawing more middle earners into higher tax bands), Reeves both showed a brutally populist touch and machine-gunned quite a few Tory foxes.
As she told me when we spoke recently, it was never going to be easy to reverse a downward spiral of decline and start to move upwards again. The sophisticated, calibrated choices she made today will be endlessly debated.
But the great question at the heart of it all, that giant game of political-economy chicken, is whether the businesses of Britain knuckle down, take on extra costs and keep trying to grow; or whether they panic and run away. That is the gamble, essentially about morale, taken by Rachel Reeves. And it is now the risk facing all of us.
[See also: Labour has imposed a £19.5bn stealth tax]
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