One hundred days of miserabilism: how can Labor get out of its budget mess? asks SIMON LAMBERT

There is an alternate reality, in which Rachel Reeves and Sir Keir Starmer have spent the past three months discussing Britain’s prospects and taking credit for reducing inflation, cutting interest rates and a recovering economy.

Fostering the national mood of optimism that came with a change of government and capitalizing on the improving economy, they then delivered an autumn budget aimed at fixing the mess in the UK tax system.

This could have been promoted as a boost to productivity and as a key pillar supporting the UK’s growth agenda.

Perhaps some tax rates had to rise a little in that Budget – after all, we need to balance the UK’s books – but slightly higher rates could be sold to us as a bargaining chip for a revived, fairer tax system.

The clean slate approach could have included ending the 60 percent tax trap, removing the cliff edges on child benefits and childcare, overhauling outdated inheritance taxes, slightly increasing capital gains taxes but reintroducing indexation, and a guarantee that tax thresholds would be lowered in future. rise with inflation.

All of these steps would make perfect sense and could be framed as a foundation for improving productivity to drive decades of future growth.

A mix of positive sentiment and Rachel Reeves setting out her position to improve the tax system for the better would allow for an adjustment to the Chancellor’s budget rules to support investment.

The overarching message is that you elected us on a mandate of growth and we cannot tax ourselves on that, so we will speculate wisely to accumulate Britain and make it a success.

Mystifyingly, Starmer and Reeves decided that their first 100 days and budget plan would look very different in this parallel universe.

Instead of much-needed optimism, they have led to miserabilism.

The decision to go all out on the ‘£22 billion black hole’ and ‘painful budget’ rhetoric as early as July 29 has led to months of speculation about cuts and tax increases.

It seems the Prime Minister and Chancellor have been on a mission to wipe out any good cheer that existed on the morning after the general election.

I’ve had countless conversations with business leaders and professional investors over the past few months who were absolutely baffled by this approach.

I’m sure Reeves and Starmer had a good reason for that, but whatever that was, it’s buried under a pile of negativity.

It has managed to be blamed for the biggest crash in consumer confidence since Russia invaded Ukraine. In the meantime, you can roughly measure the effect by looking at how much of their post-election recovery Britain-focused investment funds and funds have returned.

Postponing the budget until the economic news looked better and the election dust had settled made sense; scaring people while we waited was not wise.

The extended period leading up to the Autumn Budget has not only meant that every conceivable tax increase has been implemented, but also that most of them have been shot down because they were not worth it, were impractical or caused knock-on problems elsewhere.

Looking down the barrel, we now face the prospect that possibly one of the worst ways to raise more tax revenue is an increase in employers’ National Insurance contributions and possibly NI imposing employer pension contributions.

This would burden employment, hinder hiring and wage increases, and potentially reduce pension contributions. It is not a pro-growth policy.

If you squint hard enough, walking through employer NI might fit into Labour’s pledge not to raise taxes on working people, but ultimately workers will pay the price.

In the meantime, I am sure this is inconsistent with the clear statement in the Labor manifesto: ‘we will not increase national insurance, basic, higher or additional rates of income tax or VAT’.

Labour’s big mistake was to corner itself with that foolish promise on key taxes, which together account for around three-quarters of Britain’s tax revenue.

This was a promise designed to get the party elected that had not properly thought through what it should do once in power.

So instead of the Chancellor being another broom sweeping away the tax mess the Conservatives have left us in, the expectation is that Reeves will eventually tinker to raise some revenue and make bad taxes even worse.

Of course, that may not happen; we may get a positive budget surprise.

I think that given the space to be brave, Rachel Reeves has the potential to be a good chancellor.

She strikes me as a politician who gets it, she has spoken out against bad policies and I suspect she would really like to fix the problems in the tax system.

Perhaps the best move would be to get the bad news out of the way and simply break the manifesto promise by reversing Jeremy Hunt’s latest 2p national insurance cut.

Britain could not afford that tax cut and the former Chancellor should not have made it. Put the NI back at 10 cents and we are still 2 cents better off than before Hunt’s first NI cut came in early this year, taking it down from 12 cents.

Reeves could be honest with us, explain that and say she hopes to make cuts to NI again in the future if we can afford it.