The arrival of fresh economic expertise at the Treasury and Number 10 ought to be positive. But when they are from the same narrow gene pool – the Resolution Foundation – the result is groupthink.
Postponing the Budget until November 26, rather than rushing the fences, might seem sensible.
However, any adviser with senior City or business experience would have told Rachel Reeves that the Government is playing with fire.
Bond markets are in turmoil. A summer of disruptive speculation for wealth, housing, pensions and the banks demonstrates the damage done by delay.
The longer fiscal decisions are held up, the harder the Chancellor’s declared mission of renewal and growth becomes.
Reeves previously sought to demonstrate momentum with a series of ill-thought-out measures. Her very first burst of action to fix the foundations in July 2024 was ill-conceived.
Kicking the can: Chancellor Rachel Reeves has said there won’t be another Budget until mid-November at the earliest
The abolition of the winter fuel allowance for pensions had to be reversed. The cancellation of a super-computer at Edinburgh University was overturned this summer.
And as one of the souls holidaying in the West Country this year, I can testify that the choice of cancelling the Stonehenge bypass was a monumental infrastructure error.
Handing an extra £9.4billion to union paymasters has encouraged demands for more, and locked in unfunded pension liabilities.
The arguments against the rise in National Insurance Contributions, the rise in the minimum wage and the burden on the High Street, from changes to business rates, have been well rehearsed.
If the Chancellor was really listening to the commercial community, the dire impact on working people, savaged high streets and stubborn inflation would have been recognised. Budget pressures have loomed large.
The scale of the hole in the public finances, which has been widened by the Government’s shocking interest rate bill, is put at between £20bn and £30bn by City economists.
It is impossible to tackle this through wealth taxes. All they do is enrich armies of tax advisers, lawyers, financial planners etc, whose job it is to minimise impact through avoidance. Deputy Prime Minister Angela Rayner knows all about that.
Among options being considered appear to be a further freeze on tax-free allowances (effectively, a disguised rise in income tax), closing VAT loopholes and ending the freeze on fuel duties.
A recent note from City guru Andrew Smithers argues that maintaining demand by boosting consumption raises debt but not growth.
Corporation tax, untouched by Labour, reduces investment not profits.His solution is to cut company levies and increase taxes on consumption.
That would allow larger fiscal deficits, on the scale among the G7 at present, to be more sustainable.
One can’t imagine any of this would cut much mustard at the Treasury and Number 10 with the obsession of waging class war in the name of working people.
Injecting alternative economic and business voices into a stultified Budget process would be a grown-up response to the mess. Don’t count on it happening.
Oil patch
Withering words for the green-obsessed Ed Miliband tendency from the boss of Chevron in the New York Times.
He says the world will need oil for ‘a long, long time’. Looking across the Atlantic at BP and others he argues they have ‘lost a lot of relevance’, with a strategy of ‘going out of the oil and gas business’.
A reverse-ferret is under way. Shell is to abandon a biofuels facility in Rotterdam as it wouldn’t be competitive.
This came as US data showed exports of liquified natural gas – vital to Britain’s energy security – reached their highest-ever level in August. ‘Drill, baby drill’, is driving US prosperity.
Mon dieu!
Another sign of private equity grandeur. Blackstone has snapped up the century-old Centre d’Affaires edifice in Paris for a cool £616million, gifting a handsome profit to German group Union Investments.
Blackstone says prime property offers ‘compelling opportunities’. It begs the question as to what happens when a private debt-fuelled financing bubble bursts.
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