This week saw Chancellor Racehel Reeves take to the podium in Downing Street for what was a most bizarre press conference. It was bizarre for a number of reasons.
First off, it is almost unprecedented for a Chancellor to give a major statement to the media in such close proximity to the Budget itself. Second, having made this most unusual move, the actual speech itself contained… pretty much no information at all.
The BBC summed it up perfectly (and I am paraphrasing slightly here) when they said that the speech this week was to make sure that the first 5 pages of the Budget document (usually dedicated to the economic backdrop – read: excuses – which has led them to their chosen budget measures – read: tax rises). Usually this part of the Budget speech and the document itself are immediately forgotten and overshadowed by the actual announcements in the budget – as such, the Government’s thinking seems to be to get the excuses out in a separate speech and as a result people might pay a modicum of attention.
While this press release did not actually tell us anything, in reality, it told us a huge amount. It would seem that the foundations have been laid for the big manifesto promise to be broken. Just this morning the papers are reporting that a 2p increase to income tax has been presented to the OBR as a potential Budget measure.
Please don’t get me wrong, I always thought it incredibly foolish for Labour to have made the big tax promise in the manifesto in the first place. The issue with these kinds of promises is that they sound great at the time, but things can (and do) change.
To have ruled out changes to the 3 main taxes, collectively responsible for circa 75% of tax revenue, has painted this Government into a corner so tight it is unlike anything we have ever seen before. Clearly the public finances are in a dire state and action is going to be required, so that brings us to the present day where it does seem that Labour are setting us up to break the most prominent promise of all from a manifesto barely 18 months old.
In my humble opinion, that would surely be political suicide. For a Government seemingly the least popular in many generations to give the media (and the opposition) such huge ammunition to attack them surely would spell their downfall.
Despite all of this… it does seem like a very real possibility that this is what we will see on 26th November. I have a feeling that the next 3 weeks could be very interesting indeed from both a political and economic point of view!
