"The budget is still a month away and speculation about its contents is already in full swing. Details of what Rachel Reeves has planned will dribble out over the coming weeks, but two things are certain: taxes are going up, and they are going up by a significant amount. Obviously, the chancellor would prefer not to be in this position."
"The budget is unlikely to make Labour more popular, with a strong risk that tax increases will slow the economy, as they did last year. The importance of budgets is often over-hyped, but this one really matters. If Reeves gets it wrong there will be little hope of Labour winning a second term and her days at the Treasury will be numbered."
"Left to her own devices, Reeves would not be contemplating potentially highly damaging tax increases when the economy is weak. Likewise, she would be cutting interest rates more quickly than the Bank of England has been doing. But those decisions are not in her hands. While the chancellor can decide on the individual measures in the budget, the overall shape of the package is decided not by the Treasury but by the Office for Budget Responsibility (OBR)."
The 2025 budget will include significant tax increases that risk slowing an already weak economy. Rachel Reeves faces constrained choices because the Office for Budget Responsibility sets the overall fiscal envelope while the Bank of England targets 2% inflation. Independent institutions were empowered to prevent politically motivated fiscal and monetary decisions, but that technocratic approach limits political discretion. Budget missteps could deepen Labour’s poor popularity and imperil a second term. Reeves would prefer lower taxes and faster interest-rate cuts, but institutional rules and independent bodies largely determine the major policy outcomes.
Read at www.theguardian.com
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