IIt is normal for new governments to increase taxes in their first year. The previous government could be blamed for leaving behind a fiscal gap, and there is time for anger over the high bills to fade before the next election.
Rachel Reeves is not the first prime minister to base her first budget on such a gamble. Nor will she become the first Labor politician to be accused by the Conservatives of suffocating business with targeted levies. It is a ritualistic chant, an empty one especially coming from a political party that is responsible for the current dire state of finances and public services.
Reeves' plea force majeure Valid. The previous government did not feel obligated to do so, as it expected to lose the election. responsible financial choices. Jeremy Hunt delivered unaffordable tax cuts and planned unrealistic spending cuts in the coming years.
That much is true. Then comes the political and ideological debate about the exact dimensions of the “black hole” and the best way to fill it. Labor has made clear it will involve some combination of increased borrowing, tighter departmental budgets and tax increases.
As for who should bear the burden, there are cases where structural reform of the tax base is needed, placing more emphasis on assets rather than income. The most powerful revenue-raising instruments established in the Treasury are VAT, Corporation Tax, Income Tax and National Insurance Contribution (NIC). By pledging not to introduce most of these tools during the campaign, Labor made life in government even more difficult.
Whether that commitment extends to increasing the employer portion of the NIC is currently the subject of intense debate at Westminster. Conservatives say this amounts to a major breach of trust. Labor insists its promise is not a tax increase for “working people”, but this only means the employee side of the NIC.
The fact that the prime minister has been forced into such a predicament with such rhetoric is a sign that the political conversation surrounding taxes has faltered overall. This argument is framed in Tory terms, with governments constantly imposing “burdens” on “hard-working people” and that money is needed for essential services, but that money is needed for “efficient” costs in order to lower taxes. It is centered around the premise that there is always room for “sparing.” .
It is true that most people prefer lower taxes to higher taxes. It is also true that economic incentives diminish when the fruits of labor are confiscated too much by the Treasury. But it is also true that people like services that work, and that a well-resourced (and well-managed) public sector and social safety net can improve productivity and collective economic performance. That side of the debate has been ignored for generations.
The Conservatives spent 14 years trying to shrink the state, but cutting supply did not reduce demand for government. Austerity only succeeded in degrading the public sphere, creating higher social costs (increased crime, worsening health problems) and necessitating emergency spending. Public funds were used for crisis management rather than investment. It led to the worst possible situation: a sneak tax increase that had no political benefit to service user satisfaction.
Mr. Reeves can now break that cycle, but it will take courage to argue that taxes are not just an unfortunate requirement for fiscal consolidation. They are also a democratic expression of collective solidarity. If politics is a competition to pretend that public goods can be funded out of thin air, then the Conservatives have an advantage. Against this, Labor felt obliged to be complicit in that fiction. Now is the time to have a more honest conversation about essential services, who benefits from them, and how their costs must be met.
