Reeves vs Truss

Harvey Jones in the Express (see previous post) was not the only person to compare the Reeves budget with Kwasi Kwarteng's budget during the short-lived Truss administration over the holiday.

A member of my family who is no fan of Liz Truss said to me over the Christmas break that he thought Reeves' 2024 budget was right up there with the Truss/Kwarteng budget in terms of irresponsibility - he called it the biggest gamble in British economic history.

He predicted that there could be dire consequences for the economy in 2025 when the National Insurance rises kick in.

I hope he's wrong but I am very much afraid that he probably isn't.

What really gets me about what the new Labour government have done to business - after promising to be business friendly and deliver policies aimed at promoting growth - is that, which business might have survived several of these policies in isolation, to have them all hit at about the same time will be the biggest squeeze on business in recent history.

You can make a legitimate argument for improving workers' rights and protections. And if what Rayner calls the biggest increase in worker's rights in history had happened in isolation, business could probably have afforded it.

I used to be an opponent of minimum wage legislation, fearing that it could destroy jobs. The economic history of the past 25 years shows that introducing and increasing minimum wages, as has been done by both Labour and Conservative governments does not have to destroy jobs provided it is done intelligently, e.g. taking due account of the burdens on business and setting high enough to make a real positive effect for those who otherwise would not be paid a living wage, but no so high that many businesses really cannot afford it and you price millions of people out of work.

Again, if Labour's minimum wage increases had happened in isolation, they would probably have done more good than harm.

Then there are the tax rises.

Whoever had won the 2024 election would have had to raise taxes: it was in the small print of both Labour and Conservative plans to raise taxes by not fully indexing tax thresholds. But the level of tax rises - the biggest peacetime tax rise in British history - was not inevitable and is a result of political choices by the Labour government. In particular, the massive rise in Employer's National Insurance, from a party which had promised not to put up National Insurance, is a tax on jobs and will inevitably affect jobs, investment, wages, and result in companies going bust and closing.

And it is the combination of these three measures all imposing costs on business -  minimum wage, employment rights, and massive tax rises which will send businesses to the wall and throw many workers who otherwise would have had the security of a job onto the dole.