What a difference a day makes. On Tuesday, Rachel Reeves delivered two major speeches.
The first, in the UK city of Leeds, outlined reforms to boost investment and help first-time buyers. The second, in the evening, was the annual Mansion House address to the City, in which the Chancellor traditionally sets out the state of the UK economy. Reeves was upbeat, pointing to evidence of improvement and to the changes she has made, and is making.
Then, on Wednesday morning, the Office for National Statistics announced that inflation jumped to 3.6 per cent last month, up from 3.4 per cent. This, after analysts and the Bank of England expected inflation to remain unchanged in June. The previous day’s positivity was immediately forgotten as, once again, Reeves found herself fighting the flames.
Such was the contrast that it only served to make the joke she told at the start of her Mansion House speech appear even more apposite. Reeves made light of a traumatic few days in which her push for welfare measures designed to save money was defeated by her own left-wing colleagues, leaving her with a £5bn budget deficit. Afterwards she was pictured in tears in the Commons.
"It is a year since my party was elected to government and I was appointed as Chancellor of the Exchequer. Recently, on a visit to a school, a girl asked me: 'What job would you do if you could do any job in the world?' Given the events of the last few weeks, I suspect many of you would sympathise if I had said 'anything but Chancellor'. But I didn’t." Reeves added, for good measure: "I am proud to stand here tonight and address you for a second time at Mansion House as the Chancellor of Exchequer."
Who would be Chancellor right now? To rub it in, there was a further news item. The influential Commons Public Accounts Committee was criticising her department. "HMRC does not know how many billionaires pay tax in the UK," it reported. Reeves runs the Treasury, which includes HMRC that collects taxes.
Not only did it highlight the inadequacy of the UK government machine – the committee made a pointed contrast with the US Inland Revenue Service, which does know how much tax America’s billionaires pay – but it came as Reeves is facing increasing pressure to impose an additional ‘wealth tax’ on the most well-off.
HMRC, said the MPs, "can and must do more" to understand and explain the contribution that the very wealthiest in society make to tax revenue. "There is much public interest in the amount of tax the wealthy pay. People need to know everyone pays their fair share."
The Treasury, and government, are in a hole. The numbers do not balance. Theirs is a nation that is spending too much and not raising enough. They want to grow the economy to create wealth, to collect more taxes. But that takes time. Meanwhile, the chorus from the left, from their own people, is for action now, for targeting those who can afford to pay, namely the rich.
Already, there are reports galore of the wealthiest upping sticks and leaving. By one reckoning, 18 billionaires have quit the UK in the past two years, putting it ahead of China (12) and Russia (eight) in the league table of countries to have lost the most members of the super-rich.
To achieve the growth she craves, Reeves and her boss, Keir Starmer, must persuade investors to put their faith in Britain.
But under Labour, the rich have come to be viewed as fair game, more so now the left scored a resounding climbdown over welfare. They increased employers’ national insurance contributions, hitting businesses big and small, striking at entrepreneurs and wealth creators; they proposed scrapping the ‘non-doms’ rule, allowing wealthy foreigners living in Britain to claim preferential tax status; they charged the private, fee-paying schools for a higher tax levy; they clobbered the richest farmers with inheritance tax; they took away the winter fuel allowance from the wealthier echelon of society.
The messaging is mixed: we like you but we don’t really.
Those clamouring for the richest to ‘pay their fair share’ choose to ignore the fact that other countries are doing their utmost to entice the rich. That is because those nations know that while they may pay little in direct taxes, they more than make up for it by creating jobs and providing valuable investment.
Once, such a head in the sand attitude might not have mattered especially. But in today’s closely linked world in which communication is instant and transport is easy, it does. It’s as if the left is living in a time warp, not realising the planet has fundamentally changed.
At Mansion House, Reeves repeated the mantra that ‘Britain is open for business.’ It is open for trade, open for investment, we were assured, ‘and that’s why we must be willing to change how we do things to stay competitive in that global economy.’
That phrase ‘open for business’ appears tired, almost meaningless. The UK is open for business – provided it is on our terms and we penalise you more than other countries.
Reeves and Starmer are trying to have it both ways and that is not going to get the country attracting overseas investors while losing domestic ones. With this sort of approach, the UK is not moving forward anytime soon.
