Sir Simon Clarke is the Director of Onward, and served as Chief Secretary to the Treasury 2021-22.
It’s counter-intuitive, but the days leading up to the Budget are normally oddly quieter than those earlier in the autumn.
The reason why is simple: after months of work, the plan should be settled and ministers’ focus should be on preparing for the event itself and all the engagement and comms that will follow to make the case to the country.
I very much doubt that’s what’s been happening in the Treasury and No 10 over the weekend just gone.
Put simply – it’s been pure, undistilled chaos, with the Chancellor doing the equivalent of Wile E. Coyote frantically laying railway track in front of a speeding train.
This month opened with Rachel Reeves giving an extraordinary emergency statement to pave the way to break Labour’s manifesto promise not to raise national insurance, VAT or income tax on “working people”. She said, and I quote, “Each of us must do our bit for the security of our country and the brightness of its future”, telling the BBC “It would of course be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending”.
Fast forward two weeks, and one botched and very public slap-down of its own Health Secretary later, and a humiliated Government was in full retreat.
Income tax rates would not rise after all, because the forecasts, so we were told, had improved. Of course, the reality is that the forecasts that really matter when it comes to a Budget aren’t economic, but are whether you will be able to get your own MPs to vote for it, and Labour’s shellshocked backbenchers are clearly no longer disposed to give their own Prime Minister and Chancellor the benefit of the doubt when it comes to electorally disastrous decisions.
So a U-turn it was then, with the markets left duly askance at all the fresh weakness this revealed. UK borrowing costs rose, because while the markets may not love an income tax rate rise, the extra income it would deliver is almost certain – that’s the main advantage of raising one of the big, broad-based taxes. Instead, the Chancellor is going to present what we are told is a “smorgasbord” of smaller, alternative measures. Not only is the tax revenue set to be generated by these less inherently secure and predictable, bond traders also know that each individual tax measure may fall victim to Labour MPs’ unwillingness to vote for it at Finance Bill stage as and when they come under pressure.
So it’s all very, very ugly indeed.
A broken-backed Chancellor delivering a second-choice Budget.
The days of this being a Government dedicated to delivering growth seem an age ago now, far longer than just the seventeen months since Starmer and Reeves entered Downing Street. Growth in the third quarter of this year was just 0.1 per cent, and is likely to have actually fallen in September. We know the last Conservative government did not build enough homes, but we still managed to build 9000 more during the Covid pandemic than Angela Rayner managed during her entire time as Housing Secretary. The country today looks and feels poor, and we are on course to get poorer still.
And why is all this pain necessary? Why is it so vital to add to what is already the highest tax burden Britain has borne since the Second World War? It’s because public spending is out of control. Last year, Labour’s manifesto said they would increase spending by £9.5 billion a year. At Budget 2024, they raised it by £76 billion a year – eight times more. That was less about reverting to type than it was about not even bothering to pretend that they were serious about governing responsibly.
But the real crunch came this June, when the Government caved in to its own MPs over welfare spending.
Lest we forget, what Keir Starmer and Liz Kendall wanted to do was not to reduce welfare spending in real terms, but simply to slow the staggering rate of its post-pandemic increase – the absolute minimum that common sense requires. Even if their plans had been implemented, the welfare bill was still set to rise from £66.3 billion in 2023/24 to £97.7 billion in 2029/30. And yet even that was too much for their backbenchers to swallow. Indeed, the Government came out of a welfare savings drive in the ludicrous position of slightly increasing what it was already planning to spend.
Even as I write, it becomes apparent how mad this all is. The country is being governed by a Labour Party that can’t deliver any reductions in spending, and also can’t reliably deliver the tax rises needed in the alternative. No wonder the Chancellor’s Wile E. Coyote act is becoming increasingly frenzied. No wonder, in truth, that we were all left so discomfited by her breaking down in tears in the Commons just a few months ago.
The original sin of this Government was that it came to power sincerely believing that not being the Conservatives was enough to fix the problems the country faces.
They had done no serious preparatory work in opposition comparable to Gove’s academy reforms or IDS’ universal credit. They had not engaged seriously with the question of why multiple Conservative leaders had found the levers of the state so sluggish and unresponsive to the touch. Their arrogance was so total, their lack of intellectual curiosity so complete, that they sincerely believed that their own saintly good intentions would sweep them to deserved success.
After hubris, comes nemesis.
What we will see on Wednesday is humiliation – and another hugely painful bill for our battered country.
It seems unlikely that this Prime Minister and Chancellor can, ultimately, survive this, although I suspect they will linger on until the coming firestorm of next May’s elections. But the problem isn’t really them – it’s the Labour Party. Out of ideas but not, yet, out of time, there is nobody among them who can redeem their central problem: that they aren’t capable of responding to the sheer scale of the change that’s needed in Britain.
Our job as Conservatives is to spend the next three years showing that we are.
