At the despatch box today, the Chancellor announced £40 billion of tax increases including national insurance, pensions taxes, inheritance taxes, energy taxes, stamp duty and more. Labour’s first budget in fourteen years was one aimed squarely at the pockets of workers, businesses and pensioners in Wetherby & Easingwold.
With notable irony, the Chancellor, who once claimed she wanted growth to be the government’s number one priority, delivered a budget that the independent Office for Budget Responsibility (OBR) say will reduce economic growth. As a direct result of Labour’s tax, borrow and spend plans, growth is now forecast to be 1.8 per cent by 2026, down from the 2.2 per cent forecast under Conservative plans for the economy announced earlier this year.
At the same time, borrowing is now forecast to increase astronomically: up from £87.2 billion to £127 billion this year, and from £77.5 billion to £105.6 billion next year.
Shortly after cutting Winter Fuel Allowance for pensioners, including those with a total household income as low as £13,000 a year, Labour rolled out an attempted justification claiming a “£22 billion blackhole” in the public finances. This has roundly been dismissed as fiction, not least was there no mention of it anywhere in the OBR’s report, but that £9 billion of Labour’s alleged blackhole is the result of their own decision to award inflation-busting public sector pay rises, including a 15 per cent pay rise for train drivers already earning near to £100,000.
Similarly, the Chancellor’s claim to have inherited the worst financial situation since the war is for the birds. When Gordon Brown delivered the last Labour budget in March 2010 the deficit in the public finances was 11.1 per cent. Today the deficit is 4.4 per cent, owing mainly to the Treasury’s response to the COVID pandemic and the energy price crisis because of the war in Ukraine. In July, thanks for the hard yards we’d put in over recent years, the Conservative Party left office with an economy growing faster than any other in the G7, inflation was back to the Bank of England target and interest rates on household mortgages were falling. According to the OBR, the direct result of Labour's budget will be lower growth, inflation up and mortgage interest rates back up, too.
We now know what Labour mean by changing the shape of Britain.
For residents and businesses in Wetherby & Easingwold, pension pots will now be subject to inheritance tax. Simultaneously, inheritance tax thresholds have been frozen, meaning more estates will be subject to a 40 per cent tax, as assets increase in value, and farming families will now be forced to pay inheritance tax when passing on the family farm to future generations – a unilateral decision by government that puts the nail in the coffin of British agriculture, as it will force family farms to sell land to pay death duties and make already tight agricultural profit margins even tighter for all but farms owned by multinational corporations of pension funds.
Employers will see national insurance contributions increase 1.2 percentage points to 15 and the threshold at which national insurance is levied will drop from £9,100 to £5,000. The national living wage will increase 6.7 per cent (and by 16.3 per cent from employees aged 18-21), making it more expensive to employ staff and likely to cause businesses to review employer pension contributions to net off the impact. Capital gains tax is up from 10 per cent to 18; air passenger duty is to increase making a family holiday more expensive; VAT will be applied to school fees; and leisure taxes such as the soft drink levy and alcohol taxes are going up.
The only bit of good news I heard in the House – as an MP representing the brewery town of Tadcaster – is a duty cut for draught beer. Despite this, Labour’s budget will be sobering news for families in Wetherby & Easingwold; an old-fashioned Labour budget that puts taxes up and increases borrowing.
