Rachel Reeves' budget was the biggest tax raising budget in history - a classic Labour tax, borrow, spend budget lacking any vision or focus on stimulating economic growth. Sold by Rachel Reeves as a ‘growth’ budget, it is already demonstrating itself to be the very opposite of its billing.
First Labour’s ‘we won’t raise taxes on working people’ statement. The Institute for Fiscal Studies has confirmed that this budget constitutes a ‘clear breach’ of Labour’s manifesto commitment. Placing to one side whether you are what Labour perceives to be a ‘working person’, the real pain in the short term will be felt by our Surrey businesses, and then by families and the elderly.
The majority of tax hikes - £25.7bn of them - are placed squarely on employers with the 1.2% increase in employers national insurance payments and via the shock drop in threshold from £9,100 to £5,000. It is then compounded by a rise in the minimum wage 3 times inflation. When you factor in Angela Rayner’s proposal to introduce ‘french style’ labour laws, this government is hitting small and medium sized business hard and will discourage entrepreneurship. All anti-growth, not pro-growth.
How will our Surrey businesses absorb these costs? Profits will decrease, pay increases reduced, workforce numbers will stagnate or decrease. Businesses are telling us they have to pass on these costs to consumers to survive (which is inflationary) or they will go bust. Official forecasts show £6 out of every £10 of NI increases will be paid by workers via lower wages.
Surrey small businesses, hairdressers and coffee shops are right now wondering how they are going to survive. The care sector was not mentioned, but it will be hit hard by these NI increases. And you cannot fix the NHS without supporting social care.
Turning to families and pensioners - we had confirmation that pensioners lose the winter fuel allowance so vital for many across Surrey. Bus fares will increase.
Rises in capital gains tax and inheritance tax are a huge blow to those who have worked hard all their lives to pass on their lifetime’s accumulated wealth to the next generation. Similarly VAT on private schools from Jan 2025 is a tax on aspiration which will place more pressure on our state sector, not less.
And more hits to the family - the OBR has stated that RHDI (Real Household Disposable Income) will now be 1.25% lower in 2029 than was forecast in March pre election and 85% of this is “because of policies announced in this budget”. Rachel Reeves has also quietly dropped the £1.4bn announced in March by Jeremy Hunt to reform the child benefit system - so the system remains based on the highest earner and not household income. The child benefit ‘cliff edge’ for many Surrey families will remain.
Where was Labour’s big vision? No mention of how Labour will drive growth in our economy. Little mention of improved efficiencies which would warrant the payouts to unions etc we have seen in recent months. There was no mention of cutting the ballooning civil service back to pre-Covid levels.
Rises in public sector spending are welcome, but the issue is they are funded via borrowing and taxation.
Conservatives absolutely recognise increased public sector spending is necessary, but we say it should be funded via economic growth, productivity gains and via welfare reform.
And finally a word on Local government, which was hardly mentioned in the Budget. We still have no confirmation of multiple year settlements. In the meantime our Councils will be paying more via increased workforce costs but also from service providers, for example waste provision contracts. Councils will also be dealing with increased costs and pressure for schooling SEN and former independent pupils now priced out of the system.
At least the OBR definitively burst that bubble about the supposed £22bn “black hole”, albeit we welcome the OBR forecasting will now extend beyond the period of parliament. But, as Jeremy Hunt, Shadow Chancellor, pointed out - even if the Chancellor was right about the £22bn (she wasn’t) she didn’t raise taxes by £22bn, yesterday she put them up by £40bn.
Rishi Sunak tweeted back on 1st July “Keir Starmer will increase your taxes. Bookmark this post.” Sadly, too few paid attention.
We know in parts of Surrey the Labour vote is relatively low - but forgive me for repeating once more our election mantra - vote Lib Dem, get Labour. Vote Reform, get Labour.
Cllr Jane Austin
Surrey Area Chair of CWO