Rachel Reeves: the Budget had no plan for growth or the cost of living

The writer is the Labour shadow chancellor

What we saw from the government on Wednesday was an out-of-touch, high-tax, low-growth Budget.

As the dust settles, revelations that tax will be £3,000 per household higher by 2026/27 than when Boris Johnson became prime minister underline just how big the tax burden is becoming.

While the chancellor Rishi Sunak is keen to highlight his high-spend credentials, it didn’t take long to reveal that he has no plan to grapple with the cost of living crisis, no plan to redress the unfairness of the tax system and no plan to create a high-growth, high-wage economy.

The reality is that forecasts are anaemic, with growth falling to an average of 1.5 per cent a year in the three years to 2026. That’s lower than the 1.8 per cent we saw in the decade before the coronavirus pandemic struck, and significantly lower than the 2.3 per cent Labour achieved during our last period in government.

On top of that, businesses were only offered what, according to the Institute for Fiscal Studies, is some ‘modest tinkering’ with business rates. And they were denied the fundamental reform of the system promised in every single Conservative manifesto since 2010.

Labour would scrap business rates altogether, introducing a new system of business property taxation that is fit for the 21st century — one that will level the playing field and ease the burden on bricks-and-mortar businesses.

The system we would replace it with would promote entrepreneurship, with incentives like rewarding businesses that move into empty premises, and encourage investment, especially in green technologies. We would use additional tax receipts from the global minimum rate of corporate tax to pay for it. This is a change that the small businesses and business groups I’ve spoken to have warmly welcomed.

That’s not the only thing the government failed on this week when it comes to growth. They rowed back on their previous target for R&D spending, meaning the UK will lose out on billions of pounds in private R&D investment.

And there were few plans for how the government will get the economy moving once the bounceback from the pandemic subsides.

Remarkably, Sunak barely mentioned the biggest growth opportunity that our economy has, inexplicably leaving climate almost completely off the agenda mere days before the COP26 climate conference meets in Glasgow.

Delivering on the green transition presents enormous opportunities for Britain — creating new markets, attracting investment, leveraging in private finance and giving businesses the chance to lead the world. But this is only true if we act now, and act at scale.

Labour would meet the challenge head on, investing £28bn of capital spending in Britain’s green transition every year of this decade. This isn’t just about the moral case, but the economic one as well. According to the Office for Budget Responsibility, failure to act on climate change will mean the costs mount up for subsequent generations. If action is delayed by a decade, the price of getting to net zero will double.

As a Labour chancellor, I would also put in place measures to help us buy, make and sell more in Britain, boosting British business while filling the gaping holes in the government’s Brexit deal, especially in financial services, creative industries, farming and fishing.

These plans are crucial because lower taxes and higher spending on public services is only sustainable when it goes hand in hand with growing our economy.

In contrast, Wednesday’s budget contained no such ideas or commitments to the jobs, skills and sectors of the future that are crucial if we are to help businesses thrive and to create sustained growth. We needed a plan to tax fairly, to spend wisely and grow our economy. This government failed to deliver it.

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