Rachel Reeves has sent our economy into a doom loop – and tax rises, Trump tariffs and red tape will make things worse
Rachel Reeves’ Emergency Budget this week confirmed all of our worst fears about what Labour would do the country in their first 9 months.
We suspected that relentlessly talking down the economy, inventing blackholes, and launching attacks on enterprise would depress business confidence – meaning companies were less likely to hire staff or invest in Britain.
We were certain that hiking taxes on farmers and businesses would strangle economic growth.
We saw how they cruelly snatched winter fuel payments from some of the poorest pensioners in the country.
And we knew that borrowing billions to shovel into the hands of trade unions and ruinously expensive ‘green energy’ projects would leave the public finances dangerously exposed.
On Wednesday, the independent Office for Budget Responsibility (OBR) looked at Labour’s record and what it means for families, and I’m sorry to say the outlook is very bleak.
Growth has been halved. Inflation is on the rise. Unemployment is going to grow this year, next year, and the year after that.
Rachel Reeves has lost control of the economy and she has been forced to make emergency welfare cuts to try to balance the books.
People will lose their jobs, your weekly shop is going to get more expensive, and you can forget about a pay rise. This is the grim reality of a Labour government for Sun readers.
We’re now spending more than ever servicing the interest on our national debt – almost double the entire defence budget – and the meagre amount of money that Rachel Reeves had put aside in October to protect us from global shocks has been entirely wiped out.
I’m not surprised Labour are making such a mess of the economy. Starmer and Reeves have repeatedly shown they just don’t get where growth comes from.
Government doesn’t create growth, business does.
A budget that puts up taxes on business means that businesses will not do the things that they need to do to create growth.
The last Conservative government handed Labour the fastest growing economy in the G7. Now the economy is stagnating.
I would love to give you some optimism, but the sad truth is that things may be about to get even worse.
A hat-trick of horrors is coming down the tracks in the shape of Rachel Reeves’ Jobs Tax, Angela Rayner’s Unemployment Rights Bill, and the spectre of a global trade war.
Let’s start with the Jobs Tax.
Last October, the government broke its pre-election promise not to raise National Insurance and promptly hiked it up on business – making it much more expensive to hire staff.
Even though this punitive tax doesn’t come into effect until next weekend, we’re already seeing its impact, with companies freezing hiring, putting up prices or laying off workers.
But perhaps even more appallingly, every employer in the country has to pay Labour’s Jobs Tax – so the bombshell has also affected essential services and organisations that barely make enough to get by.
Charities, nurseries, local councils, pharmacies, GP surgeries, even hospices have been left scrambling to find the funds to cover Reeves’ tax rise.
Even schools have been hit, with some estimating that the average school could have to get rid of two teachers to cope.
Is Keir Starmer happy with the fact that the first Labour budget for 14 years could lead to charities closing, hospices being unable to look after children receiving end of life care, and schools sacking teachers? I seriously doubt it.
But when Conservative MPs pushed the Government to rethink, they refused to listen. Labour MPs voted to put the Jobs Tax on hospices and charities again and again.
The extent of Labour’s mismanagement of our economy doesn’t stop with the Jobs Tax.
Hidden in the OBR’s analysis on Wednesday was an admission that they hadn’t even yet done their homework on Angela Rayner’s (un)employment rights bill – a package of onerous new regulations and red tape vehemently opposed by every serious company and business organisation in the country.
We might not yet know the full economic impact, but we do know it will make it riskier for businesses, even small employers such as shops or pubs, to take on new staff. The people that will suffer most are the youngest – those hoping to get their first job.
And it’s all to appease the trade unions, the Labour Party’s biggest financial backers.
Finishing off the hat-trick of horrors for economic growth is the increasing risk of a big shock to global trade.
In my first PMQs in November I urged the Prime Minister to pick up the US-UK draft trade deal that the Conservative government had been negotiating with President Trump’s in his last time in office.
Six months on, we have no indication that Starmer took my advice. On the very day that Rachel Reeves had to admit she’d lost control of the finances, America levelled 25% tariffs on all car imports – including from Britain.
The Prime Minister needs to get a grip before this triple whammy of economic pain sticks our country in a doom loop of stagnant growth and unemployment.