Six things to look out for in Wednesday’s Budget and spending review

Bridget Phillipson
© David Woolfall/CC BY 3.0

Wednesday is the government’s chance to rise to the scale of the challenges that face our country. With the Budget and spending review due on the same day, it’s an unusual opportunity to reshape both taxation and spending decisions for the years ahead.

Of course, what Labour would like to see from the Budget and spending review, and what we expect we will see, are two rather different things. What we need to see is a proper, thought-through, credible and effective plan that tackles the problems Britain faces. That means getting a grip right now on the cost of living crisis and soaring energy bills, and to cut business rates to help our high streets and businesses that are crucial for our economic recovery. In the longer term, it means taking on the big challenges and opportunities that face us, with our plan to buy, make and sell more in Britain, and our climate investment pledge to tackle the crisis and create the jobs of the future we need.

For Labour, Rachel Reeves has set out – in her conference speech and again over the weekend – exactly what we would do to tackle these challenges. While the government veers wildly between promising action to resolve the problems our country faces, and claiming the chaos around us is part of a cunning and previously secret plan, we have been open about what we think needs to happen.

Our plan is clear. The next Labour government will build the high-skill, high-wage economy of the future, and we will build it here it in Britain. We will change how the government awards contracts to ensure we are buying, making and selling more in Britain. We will raise wages, improve working people’s rights and employment conditions, devolve power and deliver the change our country needs. And we will invest in moving our economy rapidly towards net zero, because delaying that spending will only make the eventual bill bigger for us all, and delivering that change will create hundreds of thousands of the clean jobs of the future.

What’s more, with energy prices soaring, the cost of the weekly shop going up and up, and the cost of filling the car going up every week, we’d be taking action right now. Labour would never have cut Universal Credit by £20 a week when bills are rising, temperatures starting to drop, and heating bills starting to rise. It was a deliberate political decision to plunge hundreds of thousands of children into poverty.

And we would have gone further. With prices rising across the board, the government is raising much more than expected from VAT. We’d be using some of that money to drive down energy bills for families, by reducing VAT to zero on domestic gas and electricity bills for the next six months. That change would be simple and automatic – no new funds, no delay, no special forms, no applications – just money off bills and staying in pockets for families across the country.

In putting money back into families across the country, we’d be taking precisely the opposite approach from the Tories. They’ve put council tax up, income tax up, brought in a new tax on workers and their employers, and cut Universal Credit by £1,040 a year.

When they want to increase taxation, they do not turn first to those with the broadest shoulders, or to the tech giants that have done well out of the pandemic. No, they reach for the pockets of hard-pressed families and the tills of small businesses. Extra taxes to pay for social care falling on working people and their employers cannot be seen in isolation: what the Tories are up to has to be seen as a larger shift, slowly moving the burden of tax towards employment and wages, and away from income from property, and from stocks and shares.

So what do we actually expect to see? Here’s six things for which we’ll be looking out and for which you should be looking out, too.

1. I think I’ve heard this one before? Where does that money come from?

The Tories excel at announcements. We reckon they have announced Northern Powerhouse Rail over 60 times, and The Guardian ran a whole piece earlier in the week on the other side of this trick – recycling the cash from earlier schemes – after even the Chancellor admitted that only 20% of his biggest single spending commitment for the day is made up of new money. Of the money announced to assist crime victims, including victims of domestic and sexual assault, just 40% is new. So before being surprised by the size of some apparently new investment, ask yourself both whether you’re actually hearing anything new, and where the money is being taken from to fund it. Robbing Peter to pay Paul is no way to fund or manage our public services.

2. Rising to the challenge on climate change

Last week saw briefing from the government that they have “an ambition” to phase out conventional boilers from 2035. They’ve come up with a £450m scheme to offer grants of £5,000-£6,000 towards a ground source heat pump. But dividing £450m by £5,000 gives you 90,000 homes. That’s roughly the number of homes in a city the size of York. As Ed Miliband has already set out, what families up and down the country need is Labour’s ten-year plan investing £6bn a year for home insulation and zero carbon heating to cut bills by £400 per year, improve our energy security, create jobs and reduce carbon emissions. Let’s see if they have raised their game enough, with the Budget just days before COP26 begins in Glasgow.

3. Real change for businesses 

Business rates are a tax system for the 20th century. In an era of online retail, which is seeing high streets move from shops where you buy to cafes and restaurants where you meet, they are an increasingly bad fit top our economy. That’s why Rachel Reeves set out at our annual conference that Labour will first freeze and then replace business rates altogether, to replace them with a better, fairer system. The Tories have promised a review in every manifesto in the last decade, and finally launched a consultation last autumn, but we’ve seen only an interim response to that so far. It’s something businesses will be watching keenly for this week. The CBI have called for “a fundamental reform of the system” that is “uncompetitive, unproductive and unfair”. They’re right.

4. New fiscal rules

It’s right that governments are clear about the approach they intend to take to how public spending is funded, how to manage the national debt, and how they balance the books. That’s why Rachel Reeves set out five fiscal rules that will bind the next Labour government in her speech to conference last month. By contrast, the Tories have missed every single fiscal target they have set themselves since 2010: not just a record of failure on our terms, but on their own terms, too. Look out for what Rishi Sunak has to say – not least whether he’s seeking to leave himself space for tax cuts on the wealthy to please the Tory backbenchers in the last year before the general election.

5. Divisions in Downing Street: infrastructure

If we know nothing else about Boris, we know he likes infrastructure spending – bridges (with or without gardens), islands with airports, tunnels (with or without underground roundabouts), you name it. In June, the government launched a National Infrastructure Bank to ensure financing for these vital projects. But the Chancellor is less of an enthusiast, and in answers to questions last week, Treasury ministers carefully avoided confirming how many people (if any) actually work for the National Infrastructure Bank, and whether it has done anything yet. What happens on infrastructure spending will tell us both what’s going on in the Downing Street power struggle, and what ambition the government really has for Britain.

6. New taxes… and new concessions

Last summer, the Chancellor launched a stamp duty concession, intended to promote the housing market but designed so badly it amounted to a billion pound bung to second home owners and buy-to-let landlords – groups carefully excluded from the equivalent devolved tax by Welsh Labour finance minister Rebecca Evans.  Watch out for more of this: new taxes, new exemptions, and new ways to clobber working families. And he doesn’t always mention them in his speech – especially if he doesn’t think they’ll be popular. Look out for the analyses from Labour and think tanks like the Institute for Fiscal Studies and the Resolution Foundation in the hours and days that follow.

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