Political Reflections on the Budget

While listening to the budget last Wednesday I began to think of what my Grandad told me in the early 1980’s and what he told me seems truly relevant in today’s world. My Grandad had been a fervent supporter of the Labour Party until the early 70’s and still one of its loyal voters up to 1979 but now this man who I liked and admired had become disillusioned. He thought that the Labour Party was supposed to help working people improve their lives and to protect them when times were bad. However, he had come to realise that the party only wanted to control their voters and to do so they thought they needed them to financially rely on the party/state. He told me a number of reasons why he thought this but, the one that stuck with me was his belief that Tony Benn was betraying the working classes. The example he gave, was that at a Labour Party Conference in the early 1970’s there had been a proposal to allow council houses to be sold to long term tenants with the proceeds to be used to build new ones. Benn got his supporters to oppose this because he argued these people would in the long term become Conservative voters. Of course, the Conservatives adopted this popular policy but failed to reinvest the proceeds in new housing and our current lack of affordable housing can be traced back to these political decisions.

So why did I think of Grandad at this moment – it was because Rachael Reeves was delivering a budget speech that was prepared for the current Left of the party who, through backbenchers, control the leadership. It was not the growth and non-tax budgets promised by Starmer, Reeves and the right-wing of the party at the General Election but a no-growth, high tax budget required by the Left in its bid to control its voters.

Rachael Reeves has admitted in interviews that this is not her budget as it will not deliver growth. The OBR revelations about the lack of a financial black hole, which was the public justification for this budget, mean that both her and Starmer are just puppets of the backbenchers and if either of them had any self-respect they would resign. This is a budget for short term party unity and not for the long term good of the country. However, climbing the greasy pole of power seems to be the only thing most politicians are interested in and to be fair that has been the norm for most of my life. These types of politicians are what I called Post Turtles. By this I mean if your saw a Turtle sitting on top of a pole you would wonder what the hell they are doing there. Reeves and Starmer are extreme examples of this phenomenon. However, a politician would argue that those that tried to do the right thing, like Frank Field, are quickly sidelined from front line politics.

The main problem is that Labour’s Left-wing definition of being wealthy seems to be anybody who is working and that is the nub of the problem. Most ordinary people used to think that being well off was anybody who paid 40% tax but that will rise to over 10 million people by 2031 and likely to be around the median wage.

Listening to a jubilant McDonnell on Sky the day after the budget, a man influenced by Tony Benn, confirmed the impression that the Left is now in charge. He will, with his cohorts the ex-Corbynites who stayed in the party, continue to put pressure on the leadership to adopt socialist policies to redistribute wealth to their definition of the less well-off.

Like the Danes he will always come back for more. So, what are the long-term political implications for the Labour Party in putting forward this budget?

1. The quick betrayal of the manifesto will be something that will be constantly thrown at them by the media and voters. It will be argued that the party can never ever be trusted to look after the country’s finances, and they have little ammunition to fire back.

2. The Far Left will also see the watering down of the Employment Rights Bill as a betrayal of the manifesto. This announcement was made the day after the budget when most of media was still pouring over the details of the budget and was obviously the measure the Right of the Labour demanded in return for the budget. One small attempt to not stifle business growth but sure to be a seed of another backbench rebellion.

3. The warnings of Rishi Sunak during the General Election debates will be frequently aired and this has given Kemi Badenoch an opening and one to be fair she started to exploit in her reply to the budget. Badenoch has the ghosts of Johnson and Truss to exorcise which will be hard to achieve in one term, but she seems to be made of the right stuff if you are a Conservative supporter.

4. This budget could help Labour electorally in seats with high Muslim populations as this group has a disproportionately high number of families favoured by the scrapping of the two-child benefit cap. However, I believe that sectarian politics is here to stay.

5. The fact, that by 2030-31 10 million people will be paying the higher rate of income tax is going to annoy loads of ordinary working people. As I found out, as a referee, fairness is what most people crave. When they sense injustice that is when they become annoyed and their behaviour becomes aggressive. This budget will be seen as unfair as a hard-working person will see themselves as being exploited to subsidise the lifestyle of people who do not wish to work and let’s be fair for some families it would be economic suicide to work. The 1945-51 Labour Government created the Welfare State to protect you in hard times not as a lifestyle choice. The path the current Labour Party is going down cannot be economically or politically sustainable for the country.

6. Mansion Tax. Let’s be honest nobody has much sympathy for people with homes worth £2 million plus but interestingly 9/10 constituencies with the highest proportion of these homes have Labour MPs! The Socialist voting tendencies of these constituencies will be tested but if they decide to stay left wing and jump ship to the Green Party, they might find an even bigger bill arriving on their computers in the following decades!

7. The Gambling Taxes will not have the effect that the Labour Left believes. The Netherlands have recently tried a similar policy, and it has led to a significant decrease in revenue for the government and a significant increase in the black market. The black markets have no regulation and no protection for irresponsible punters. The black market will be more attractive to punters because the odds will be better and in the age of WhatsApp marketing of products the black market will grow very easily. Punters who stay in the regulated market will suffer from poorer returns as the big conglomerate’s claw some of their money back from them. Labour has failed to learn the lessons of Prohibition but then history is not often a politician’s strongest subject otherwise they would not keep making the same mistakes.

8. If anybody thinks that this is the end of the tax hikes they may well be in for a shock. There is no reason to believe that the Labour Government will be able to meet the deficit targets of the Office for Budget Responsibility, and the Left will want more redistribution of wealth. I also believe that the tax base will shrink whilst the number of people seeking welfare will increase.

9. Unemployment will continue to rise for number of reasons. Businesses who are on the edge will see the Employment Rights Act combined with more increases to the Minimum Wage as a reason to give up now before the tax situation becomes worse. I believe that business should not rely on the government to top up people wages in order for them to thrive but combining these changes with the recent National Insurance increase is going to be hard to budget for. Other businesses affected by other tax changes like large bookmaking conglomerates will shed significant numbers of people to claw back money lost to the government. Hospitality businesses are also losing a rate relief of 40% so expect pub closures to quicken. By the way, the Chancellor originally claimed business rates were going to fall because the multipliers used on the ratable value are going down. However, the ratable value is going up, and the tax relief is being removed hence a higher bill.

On a micro level the ending of Tax Relief on Horse Training Yards will increase their liability for business rates. This could lead to up to a 40% increase in costs. With many of these businesses on the edge a small increase in rural unemployment could well be the result.

10. The electoral need for the Labour Party to tackle immigration has become even more important after this budget. The need to cut spending in this area will decide how people view their taxes going up and how much more taxes are going to have to rise. The Left, as their ideological purity dictates, will resist the Home Secretary’s policies. They will spin the numbers in Net Migration to June 2025 into looking good for Labour but look below the surface and you will see the policies that caused most of the reduction in immigration were put in place by James Cleverly when he was Home Secretary. Labour will ignore the shocking emigration figures.

11. The emigration from this country of anybody who has ambition and has an opportunity to do so will continue. 693,000 people left this country in the year to June 2025 the highest for a hundred years. As long as there are people left in this country with drive and ambition this brain drain will continue.

12. The fact that Rachael Reeves has also allocated over £15 billion to pay for housing asylum seekers over the next ten years is hardly going to go down well with this former Labour supporters who are voting Reform in ever bigger numbers.

13. Inflation will stay higher for longer as firms pass on their increased costs to their customers. I believe that the Bank of England will as a result be reluctant to quicken the pace of Interest Rate decreases.

14. When the next crisis hits, and that is only a matter of time, whoever is the government at the time will have no room for manoeuvre without borrowing a lot more and combining that with even more taxation.

15. Labour’s attempt to win the under 21 vote continues with the larger percentage increase in the minimum wage for this group. Those people may wish to look at the small print of this policy, which implies that these incentives will quickly be paid back in taxation should they continue to work.

The Labour Party’s dive to the bottom continues forgoing the workers it was formed to represent because their views do not tally with the Intelligentsia Socialists who think they know best. They will replace their votes by creating and supporting a larger underclass of people who only take from society and do not contribute. The problem with this electoral tactic is that, with the Green Party now under the leadership of Polanski, this is a very competitive market!

I never once voted for Margaret Thatcher, and I did not like her style or policies, but I cannot help but remember her statement that the greatest problem with socialism is that it runs out of other people’s money. My Grandad turns out to have been a wise old man. He was brought up in abject poverty, lost his father at 13 to the Spanish flu, was largely self-taught and thought that you should be able to improve your lot by hard work only to find out that the party he supported wanted to keep him in his place. Not much changes in over 40 years, the workers of this country still do not have a party that helps them improve their lot, and that is why Reform will continue to do well despite its many flaws which are unlikely to benefit the ordinary worker.

Written by Peter @prwillingale