“The election campaign starts tomorrow,” one Labour source put it to me yesterday. Westminster chatter over polling day is frenetic, even if the atmosphere in parliament is empty. Could a post-Budget polling boost encourage No 10 to call an election? There have been so many attempts (and failures) to shift the dial of popular opinion that it is hard to see how another 2p cut in National Insurance will make a difference when it didn’t work in the autumn, and when taxes are increasing overall.
The move will infuriate Labour, though. The cuts are expected to be funded by spending reductions after the election and rising taxes (probably on vapes and non-domiciled income). A Labour government would have to decide whether to impose those spending cuts or find more money to fill the gap. And a tax rise on non-doms blows a hole in Labour’s plans (which I wrote about last week). All the policies Labour planned to fund with the non-dom policy – of which there are many – will now need to be paid for in another way. That is because the money is being spent on a tax cut that Labour does not want to reverse. “We need to keep our heads tomorrow, pause, and work out where we will find the money,” was how one shadow cabinet minister put it to me.
On a micro scale, this could re-inject some ideological disagreement into politics. Labour’s Wes Streeting made an interesting point on Andrew’s LBC show last night. He said he looked forward to explaining to constituents that the government did not plan to spend the money on extra MRI scanners and more nurses. “We will have to look at other ways of funding those pledges,” he said.
Well here is a divide: the government uses extra money to reduce the tax burden, while Labour wants to put it into public services. A key question is whether Rachel Reeves cleaves close to the government, or lays out this difference in her response to the Budget. It could feel like the Truss days again.
Or, at least, it would if the money involved wasn’t so small relative to the government’s overall budgets. Throughout today, remember that the average Office for Budget Responsibility (OBR) forecasting error for the national debt over a five-year period is £415bn, according to Sky’s Ed Conway. That means the Chancellor’s announcements today are shaped by numbers that will probably have little relation to reality in a few years’ time.
Enjoy the Budget. Watch Reeves’s response carefully. Read the OBR report on the details closely. And remember, an election is looming above Tory MPs like a giant P45 blimp.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.
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