We try not to do politics in these columns but following headlines suggesting Chancellor Rachel Reeves may well become the first to increase Income Tax in 50 years in fact (breaking manifesto pledges in the process), we had a little go at envisaging her speech before the November 26 Budget.
(The following is tongue in cheek and not in any way her actual words!)
‘I am sorry to say that economically, the country is in a rather worse state than when we came to power almost 16 months ago. I realise I did try to address some of the issues we perceived we inherited, like buying-off many public sector employees with generous and way above-inflation salary increases and without any agreement to improve staff productivity (which is now apparently the poorest it has ever been).
‘I also tweaked government borrowing rules, enabling me to borrow a significant extra sum which we could then spend recklessly but I realise this was all rather ill-advised as support for us has since plumbed record lows. The public sector unions are back for even bigger pay rises, our backbenchers won’t let us cut benefits as we must (and are demanding even more which will disincentivise yet more people from looking for work) and the cost of our inflated public borrowing is gobbling-up even more of our tax receipts.
‘Yes, we made mistakes. I told you that removal of the Winter Fuel Allowance was to raise money but afterwards, admitting doing that was a big mistake, it has cost us more to reinstate it for 90% of the people who had it before, causing grief and worry to all pensioners and now changing the qualification basis to ‘household income’ even though we have no way of knowing how much that is of course, as we tax people individually.
‘It was well-intentioned and maybe we should have listened to wise counsel and simply made the allowance taxable instead – a simple and equitable solution as opposed to what was effectively a poor choice. I am truly sorry for that.
‘Still, loads of new claims for Pension Credit arose and while that’s costing the country new benefit claims which we had no provision for, it’s good they are having their entitlement. After all, it’s now a long time after the last administration so I can’t keep blaming them anymore, can I?
‘We increased the tax burden on the wealthiest and many of those very capable people have fled the country so instead of taking more tax from them, now we take nothing at all. These policies have also dissuaded many new wealthy and highly skilled international people from wanting to come here and they used to bring their inward investment too.
‘I also thought it was great to increase National Insurance on working people’s jobs. I just cannot understand how vacancies have fallen, firms are cutting-back on recruitment and unemployment has risen.
‘I have also presided over higher inflation, colossal energy costs (despite very cheap global gas and oil prices) as businesses have had to increase prices to cover these and the extra taxes levied and National Insurance upon them (and way above inflation increases in the Minimum Wage). This has also meant the cost of government borrowing rose to higher levels than even during the abortive Truss/Kwarteng Budget and so we need more tax to pay the extra interest.
‘So, I am sorry. We have made quite a few economic mistakes but I am afraid on November 26 I am going to have to make you pay for that with increased taxes, reduced public spending and a sorrier economic outlook than if we’d have not done several of those things in the first place.
‘It’s also hard for any upstanding citizen and business to keep on top of all the paperwork, bureaucracy and regulations as well and that includes me, even when I employ competent professionals to guide me.’
So yes, tongue in cheek but in the real speech, where is the admission of a single mistake? Wouldn’t that have been honest and genuine and perhaps the country would be more behind her?
Some international factors have had a bearing on global economics but things are worse because of what ‘they’ have done.
Still, within all of this we remain optimistic – albeit realistic and to make value-led decisions in helping our clients navigate their finances and investments.
We shall, of course, take one more (serious) look at the Budget next week!
