Daniel Sillett: Reeves has paved the way for more tax hikes to kill off the economy once and for all

Daniel Sillett is a Conservative political assistant, commentator and author.

Rachel Reeves thought she was coming out with the big guns at her latest Spending Review, announcing over £2 TRILLION in government spending.

However, in the early hours of the very next morning, Reeves’ bubble was well and truly burst by news that the UK economy shrank by 0.3 per cent in April.

Never before have I seen a plan unravel in under 24 hours and in such spectacular fashion. It was just another step on Rachel Reeves’ road to Britain becoming poorer – and I’m afraid it isn’t going to stop here.

With a shrinking economy comes shrinking tax receipts, meaning Reeves will have no choice but to hike taxes further in the autumn to pay for it. It’s typical Labour – spend, spend, spend like excitable children in a sweet shop, only to come crawling back to the responsible taxpayer after running out of pocket money.

Before getting into doom and gloom forecasts for the future, let’s take a look at where all this money is actually going.

The biggest winners were defence, which was handed a £11 billion uplift, and the NHS which will rake in an extra £29 billion a year. But £39 billion was also allocated to social housing. £14.2 billion thrown into the Sizewell C nuclear power station. A record £22 billion poured into science and technology. Education is being boosted by £3.5 billion, in addition to a combined £4.7 billion to rebuild schools. £2 billion is going into AI and £15 billion into transport networks for the North.

The list of losers, by contrast, was exceedingly small. The Home Office and the Foreign Office had cuts, with defence being prioritised over foreign aid. The cuts were despite the police force warning about the impact on their services.

Look at the size of those two paragraphs. That’s what Labour’s gargantuan spending programme looks like – and that’s not even all of it.

After cutting the Winter Fuel Payment in October, Rachel Reeves went to the other extreme – spending £1.25 billion to restore the payments for over 75 per cent of pensioners, completing the biggest screeching U-turn in history.

What was all the aggro for then? Where’s the apology still to the 10 million pensioners who lost the payment last winter – many of whom will have been forced to choose between heating and eating? This government is controlling people’s lives like pawns on the political chessboard without a care in the world.

Every element of Reeves’ spending spree deserves a vulturous unpicking – but none more so than the £29 billion boost to the NHS, which is riddled with classic Labour hypocrisy.

The Chancellor is trumpeting opening the floodgates to pump ever-more cash into Britain’s NHS as if she’s the best thing since sliced bread. She’s not. But that’s not even the point.

In January 2024, the Labour Party launched an attack on the ‘cultural problem’ of waste in the NHS. Wes Streeting, now the Health Secretary, claimed back then that the NHS ‘wastes £10 billion a year’.

When you discover that, even back in 2015, the NHS was spending £142 million to prescribe aspirin, paracetamol and ibuprofen, it’s fair to say this is a scary point. Even in today’s wild world where the £3 meal deal is a distant memory, a box of 16 paracetamol tablets can be secured over the counter for just 37p in Tesco (other supermarkets are available), avoiding a £142 million bill to the NHS.

Return now to Rachel Reeves, who has decided that the best way forward is to throw so much money at an organisation that her own Health Secretary has called wasteful, that the NHS now has a budget broadly equivalent to Portugal’s entire GDP.

Is it just me, or does this fly in the face of Labour’s attack on a ‘culture of waste’? Perhaps that’s a broader point. Will Reeves’ spending spree actually solve anything? Or would Labour have been better reforming public services, practicing what they preach and cutting out the waste? I suspect many of us Conservatives would have been a little less outraged at the latter.

I’m afraid that, whatever you thought of Rachel Reeves’ Spending Review, one thing remains certain. With all this spending, more tax rises in the autumn are inevitable.

And this is a major problem. £40 billion in tax rises last autumn kicked in this April – and, lo and behold, the economy shrank by 0.3 per cent in April. Furthermore, the economy grew by just 0.7 per cent in the previous three months, which is roughly equivalent to the speed of a snail.

But is this sluggishness at all surprising? I’ve been warning of this ever since Reeves’ autumn budget. All this rhetoric about no tax rises for working people is absolute nonsense. Business owners are working people – and they make the jobs for other working people, which altogether keeps the world spinning round.

But with Reeves’ £25 billion hike in Employers’ National Insurance finally setting in, seizing up the engine room of the UK economy. It’s not even just speculation now. It’s there for everyone to see – businesses have packed up, and the economy has shrunk.

The trouble is that such a downturn is not even temporary.

Reeves cemented in higher costs, with the National Minimum Wage rising to £10 per hour, and now with a government spending bill that requires even more tax squeezes down the line. I say ‘cemented in’ because you can hardly reverse a wage increase – at least not without committing political suicide. And let’s not forget that Reeves’ claustrophobic fiscal rules have left as much room for manoeuvre as an elephant in a match box.

This all means one thing. Further tax increases in the autumn are Labour’s only remaining option.

So there we are. As Shadow Chancellor Mel Stride said, it’s spend now, tax later. One step at a time, Rachel Reeves is killing the economy – as we all knew she would.