The Chancellor missed an opportunity to plan for growth, writes TERRY MURDEN
Well, that was disappointing. At best, we got a less scary statement than last year’s horror story. The markets felt they could live with it and bond yields fell. There will be no Truss-induced meltdown. But a year on from “fixing the foundations” there is little evidence of any building work taking place. We will all limp into the new year with the same tax burdens and lack of support because Rachel Reeves once again let the country down.
Inflation is falling, interest rates could come down on 18 December. The economy is growing (just). A month before Christmas, the Budget was an opportunity for the Chancellor to play Santa and offer a few gifts to needy business owners and the big beasts of industry who just need the confidence to invest.
Instead she chose Scrooge and Mr Micawber as her role models, reminding us that if we continue paying current interest charges on the nation’s debt it will be a certain route to misery.
The need to tackle the debt mountain is undeniable, but where was the plan for growth? Business is being raided to pay for ever more welfare payments. There is no incentive to work, nor to create a business. Enterprise allowances and dividends were hit, when there should have been greater incentives.
There had been an expectation that Ms Reeves would reform the energy profits levy after warnings that it is devastating the North Sea oil and gas industry and leading to thousands of job losses. She eased the restriction on exploration, but that will count for little if explorers are then hit by taxes that render such activity unviable.
Donald Trump will be excused if he looks at the rise in duty on whisky and tells Scotland Secretary Douglas Alexander to forget about reducing US tariffs.
The Office for Budget Responsibility, or Irresponsibility after yesterday’s Budget leak, estimates that the decision to pile tax on pensions will lead to worse pensions.
Given the fragility of the economy – and that humongous national debt – some changes were understandable, and she chose to spend big and tax big. Rather than introduce bold moves to incentivise investment she chose punitive measures such as higher taxes on property (in England) and savings income; restrictions on salary sacrifice, a new tax on electric vehicles.
Where is the free-market dynamism that Ms Reeves promised while in Opposition? This Budget was more evidence of the Treasury being steered, not by economic growth, but by pandering to Labour’s disgruntled left wing. Following threats of rebellion, the Chancellor abandoned cuts to disability benefits and winter fuel payments and has again surrendered to her backbenchers by scrapping the two-child benefit cap, all of which will raise the welfare bill as a percentage of GDP and do nothing to erode debt. So much for Sir Keir Starmer’s pledge to put country before party.
Ultimately, this so-called ‘smorgasbord’ Budget, delivering a range of tax and spending measures, created a mess of changes so complex that experts will spend months trying to work out how anyone will benefit.
Some, like the relaxation of energy levies, even contradicted government policy. Some make little sense. She wants to encourage investment in the stock market then raises the tax on dividends. She wants to assist “scale-up” companies, but cuts tax relief on venture capital trusts.
Rachel Reeves’ tears in the Commons earlier this year is one of the defining moments of 2025. The year ends with cries of frustration from business leaders who were hoping she had learned from the mistakes of her first Budget.
Terry Murden was Scotland editor and Business Editor at The Sunday Times, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business
There will of course be more pain to come for us in Scotland on 13 January when our own financial wizzard, Shona Robison reveals her budget. There is no doubt she will freeze our already lower tax band thresholds and use this as an opportunity to impose a Scottish Mansion Tax – with a lower starting point than England. It is sad to see the exodus of talent that is already happening and will now accelerate.
As Churchill said, “A nation trying to tax its way to prosperity is like a man standing in a bucket trying to lift himself up by the handle.” They just don’t get it.