Britain’s Labour Budget: bold ambition, uncertain prospects

{"text":[[{"start":null,"text":"

"}],[{"start":10.3,"text":"Britain’s chancellor Rachel Reeves inherited a deeply troubled economy: slow growth, strained public services and high debt. "},{"start":17.279,"text":"After months of confidence-sapping speculation, at Wednesday’s Budget she delivered a budget that was dramatic in scale: around £40bn in higher taxes — the largest increase for a generation — £70bn in higher spending, and £30bn more in borrowing, per year. "},{"start":33.047,"text":"This marks a turning point for Britain, towards a significantly stronger role for the state in its economic model, with the tax-to-GDP ratio set to rise to a postwar high by the end of the decade. "},{"start":43.289,"text":"Much of the tax burden is set to fall on business. "}],[{"start":47.099999999999994,"text":"Reeves’ package has begun the hard work of stabilising public services, raising capital investment and improving the fiscal rules. "},{"start":54.19199999999999,"text":"But, when so much of the heavy lifting she envisages falls to the state, the question is whether the reality of her growth strategy matches the rhetoric. "}],[{"start":62.879999999999995,"text":"The main beneficiaries of the chancellor’s dramatic fiscal loosening are public services, particularly the broken health service and underfunded schools. "},{"start":70.797,"text":"Long hospital waiting lists, chronic illness and teacher shortages impose strains on the economy. "},{"start":76.17699999999999,"text":"The major tax change was to raise £25bn from higher employers’ national insurance contributions. "},{"start":82.294,"text":"The move raises the costs for business but there must be no illusion: working people will still suffer as higher business costs translate into weaker wage growth and less hiring. "}],[{"start":92.11999999999999,"text":"True, tax rises were inevitable. "},{"start":94.89899999999999,"text":"But the benefits remain uncertain. "},{"start":97.11699999999999,"text":"First, the Office for Budget Responsibility expects the chancellor’s spending measures to deliver a near-term boost, but reckons GDP will be largely unchanged in five years’ time. "},{"start":106.94699999999999,"text":"The government’s admirable plans to unlock the planning system and an ambitious capital investment agenda, if delivered, may yet convince the fiscal watchdog that Britain is on a better trajectory. "}],[{"start":117.80999999999999,"text":"The chancellor listened to concerns, and contained some of the hit to the UK’s competitiveness by watering down rumoured plans to raise significant levies on private equity and wealthy investors. "},{"start":127.57699999999998,"text":"But businesses and investors — which power economic growth — will still feel squeezed. "},{"start":132.457,"text":"The NICs increase comes alongside capital gains tax increases, a minimum wage hike, and a costly workers’ rights bill. "},{"start":139.387,"text":"And although Reeves made some sensible tweaks to inheritance tax, she missed an opportunity to outline a broader plan for growth-enhancing tax reforms. "}],[{"start":147.63,"text":"Second, if subdued growth — and strains on the private sector — continue, rising demands on Britain’s public services risk pushing taxes even higher. "},{"start":156.62199999999999,"text":"Reeves boosted day-to-day funding for public services by 1.5 per cent in real terms, which will still leave some services with tight budgets. "},{"start":164.464,"text":"Vague plans to make cuts by boosting public sector productivity and reduce welfare fraud and errors must actually deliver reasonable savings. "}],[{"start":172.26,"text":"Third, driving growth, and improved tax revenues, will also depend on how well Reeves can execute on her plans to boost investment. "},{"start":180.027,"text":"She outlined important plans to spend £100bn over the next five years on transport, housing and research and development. "},{"start":187.03199999999998,"text":"Her new fiscal rules are an improvement on the old ones, and help maintain fiscal discipline while also freeing up additional space to borrow for much-needed public investment. "},{"start":195.637,"text":"Though gilt yields have hit a five-month high, for now it seems she has retained the confidence of financial markets. "}],[{"start":202.31,"text":"The chancellor has opened the door to higher investment, which if sustained, could be game-changing for Britain’s growth trajectory. "},{"start":209.03900000000002,"text":"But it is now essential that new funds are channelled efficiently to productivity-enhancing projects. "},{"start":214.082,"text":"With her inaugural Budget, Reeves has begun to fix the foundations of Britain’s economy from a difficult starting point. "},{"start":220.112,"text":"But if this government is to live up to its branding as “pro-growth, pro-business, and pro-worker” it has a lot more to prove. "}],[{"start":226.47,"text":""}]],"url":"https://creatives.ftmailbox.cn/album/178247-1730341882.mp3"}