Treasury fails budget test: Reeves got no backlash on her £40bn spend, says ALEX BRUMMER
A budget with £40 billion in tax increases, which affect almost every citizen, will never win hearts and minds.
The problem with Rachel Reeves’ first foray into the post office box is that no one is happy with it, including those who oversee Britain’s budget.
Even the hallowed Office for Budget Responsibility (OBR), which the Chancellor has tried to keep out of play, had doubts.
Open door: even though the Ministry of Finance is of course conservative in its budgetary thinking, the left-wing content of the budget would not meet with much resistance
The downgraded growth forecasts beyond 2025, higher inflation forecasts, the OBR report’s discussion of ‘fiscal illusions’ and the difficulty of monitoring the recast debt rules all point to vulnerabilities in the Reeves approach.
When Gordon Brown inherited the Treasury in 1997, he deemed it unsuitable for Labour’s purpose. Among the first victims was permanent secretary Terry Burns, who was considered too free-market in his views.
Such radical changes turned out not to be necessary for Reeves. It looks like she pushed an open door.
Even though the Ministry of Finance is obviously conservative in its budgetary thinking, the left-wing content of the budget would not face much resistance.
An expansion of the state, paid for by higher national insurance contributions and the ‘hateful’ punishment of small farmers and businesses, non-domiciled taxpayers,
North Sea oil drillers and several other wealthy taxpayers continued.
The lack of a growth agenda – hopefully it has not been displaced – is a worrying gap. The state approach must have come as a relief to civil servants after fourteen years of Tory rule.
Permanent Secretary James Bowler, who worked with Brown and the late Alistair Darling, is experienced and knowledgeable.
He is believed to be less likely to challenge ministers than predecessors Tom Scholar or Nick Macpherson.
The Treasury complied with the quick and dirty audit Reeves demanded and came up with the fabricated £22 billion black hole.
It unleashed careless speculation, leading to ordinary taxpaying citizens taking lump sum pensions and making other unnecessary personal decisions.
Borrowing space was created by weakening the fundamentals with the introduction of the Public Sector Net Financial Liabilities (PSNL) measure of the debt-to-national output ratio. None of this was beneficial to the government.
The skepticism at the Institute for Fiscal Studies, the questions from credit rating agencies S&P and Moody’s and the decline in consumer and business confidence are all unintended consequences.
There was no wise advice.
Trench warfare
Given the trajectory of Burberry’s share price this year, which fell 39 percent from yesterday, all it took was speculation about bids to send the stock skyrocketing.
Even the hallowed Office for Budget Responsibility (OBR), which the Chancellor has tried to keep out of play, had doubts.
The thought of the venerable British luxury brand being swallowed up by nouveau riche quilted jacket maker Moncler fills you with horror. Moncler makes no secret of its ambition ‘to consolidate the new luxury segment’.
The increasing power behind the throne at Moncler is luxury superpower LVMH, which took a seat on the board.
Burberry chairman Gerry Murphy must be careful what he wishes for. Net-a-Porter, the last British luxury brand to be swallowed up by the great beast Richemont, failed under new ownership and was sold for a price.
Burberry has been warned.
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