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Wednesday’s Budget could be Rishi Sunak’s final set-piece opportunity as he seeks to control the agenda and win voters’ support ahead of the general election.
But it will also have huge implications for Labor, which has an increasing chance of winning and will also have to deal with the fallout from Prime Minister Jeremy Hunt’s decisions.
Both have met expectations. The Conservatives have repeatedly explained that there is little money left to finance their big budget proposals. Mr Hunt is understood to have dampened hopes for his big tax cuts in a private meeting with Conservative MPs last week, but many believe this means he doesn’t care what he does. I suspect that it’s just not.
Labor needs to think further forward and manage expectations on a larger scale. Shadow chancellor Rachel Reeves stressed last Wednesday that her party would have a “disastrous legacy” if it won the election, which she argued would hamper its ambitions in government.
“George Osborne promised to fix the roof of the country. But the Tories have smashed windows, kicked down doors and are now burning down houses,” she said. “You can’t turn everything around overnight.”
Labour’s lead in the polls now appears to be deep-rooted, and the party needs to look at the problems it may soon face in government, which are significant.
“Rishi’s Recession”
At the top of the list are the difficult economic conditions that the next administration is likely to face. Mr Reeves last month cited bleak GDP figures, accused the prime minister of having “turned the economy upside down” and introduced the phrase “Rishi’s recession”, which is almost certain to be used during the campaign.
Labor leader Sir Keir Starmer has also attacked the Conservative Party over rising mortgage and utility bills, which are eating away at wages amid the ongoing cost of living crisis.
But these can quickly become his problems. Josh Williams, strategy director at pro-Starmer think tank Labor Together, said: “If Labor wins, which is by no means guaranteed, the legacy we receive from this government will be heinous. It will be very different to the situation we had in 1997, when Labor won power.” . ”
Conservative tax and spending trap
This situation is likely to worsen with tomorrow’s Budget. The Chancellor is reportedly considering a number of measures to fund the March 6 tax cuts, including abolishing or changing “non-Dom” tax status, seen as a political necessity for the Conservatives ahead of the general election. It is being
This could create an instant black hole for Labor. Once in power, Labor planned to abolish the non-dom status and use the proceeds to pay costs. new NHS equipment provide with staff Free breakfast club in all primary schools.
If Mr Hunt abolishes eligibility to pay for the tax cuts, Labor will have to decide whether to fund spending commitments elsewhere, withdraw the tax cuts or cancel them. And that dilemma is likely to be repeated at a broader level, with Treasury officials planning to cut public spending from 2025 onwards to fund tax cuts from the Hunt without violating government borrowing rules. It is reported that a budget proposal is also being prepared.
The details of individual budget spending cuts do not need to be revealed until after the general election, creating a political headache for the Labor Party if it forms the next government.
James Smith, research director at the Resolution Foundation think tank, said: “Whoever wins the next election will face a combination of previously announced plans to increase taxes and cut public services, coupled with weak economic growth and tight public finances. “We will inherit a difficult situation.” ”
Julian Jessop, an economics researcher at the right-wing Institute of Economic Affairs think tank, believes Labor will have no choice but to increase its tax burden.
“if [Hunt] “Using all the fiscal space on tax cuts obviously creates a bigger problem for Labor because public spending is already tight,” he said. I.
“They’re definitely going to want to spend more, so the only way to do that is to cancel some of the tax cuts and find other tax increases.”
The Institute for Fiscal Studies (IFS) said similarly, saying in a major pre-election report that any future tax cuts will inevitably need to be reversed if public spending does not fall similarly. I’m warning you.
Public services in crisis
Public services such as the court system, bin collections, libraries and other community services run by a council on the brink of bankruptcy have already been depleted. In the future, it could face further tax cuts to expand the chancellor’s tax-cutting leeway by cracking down on new victims.
Alfie Stirling, chief economist at the Joseph Rowntree Foundation, a social research charity, warned: What we all know is that almost all public services are exhausted by pressures such as waiting lists. It is not clear on a practical level where these savings are coming from. ”
But Mr Reeves said a Labor government would “not abandon ironclad fiscal rules” and maintain a “relentless focus” on growth rather than loosening the purse strings to boost Britain’s economy. Therefore, in the short term, voters’ demands for improved public services may need to be tempered.
Labor says it is essential to take on this long-term battle to “address the long-term weaknesses facing the UK”.
“The next government will have to make decisions with long-term rewards, many of which will be difficult,” Williams said.
“That is why Mr Starmer’s promise to run the government with a long-term mission is so important. It will be good for them and the country.”
But this strategy could be politically difficult as many Labor supporters are desperate for more investment in deteriorating public services.
lack of bold vision
With potentially 10 months until the UK election, we need to see Labour’s manifesto and full government plans. But much is already out there, and critics concerned about Mr Starmer’s cautiousness towards the opposition have repeatedly said that Labor lacks a bold new vision and has lost its way within the government. There is a possibility that it will.
The shift away from the party’s most high-profile and ambitious policies didn’t help. Last month, Mr Reeves concluded that “something has to give” if the party was to meet its promise to balance the budget, halving Labour’s flagship pledge to spend £28bn on environmental projects. announced that it would be reduced.
Mr Starmer also reversed his predecessor Jeremy Corbyn’s pledge to abolish university tuition fees.
The party claims this is all part of an effort to eliminate impracticalities and create a “blast-proof manifesto.” But he warns that a safety-first approach risks a government losing its power to implement serious reforms and a premature decline in approval ratings, as happened with Anthony Albanese’s Labor government in Australia. ing.
But Labor insiders insist the party’s manifesto contains bold policies, particularly plans to create a new national energy company called Great British Energy.
“It could be a very significant intervention in the market,” one said. “It really has the potential to promote domestically produced clean energy and lower people’s bills. And putting that in the manifesto means we’re on a mission to do something pretty big.”
division of labor
Labor, scarred by 14 years in opposition and desperately trying to keep its chances of defeating the Conservatives, has largely been a model of internal discipline in recent years. But the Israel-Hamas war and Mr Starmer’s response mean some cracks are starting to show.
It took until last month for Labor leaders to call for an “immediate humanitarian ceasefire” in Gaza for the first time since the war broke out in October.
A left-wing labor official said: I Mr Starmer’s change in position on the issue showed that he has been unable to unite the party since becoming leader.
“Keir is not uniting the party,” they said. “He promised to end factionalism, but all he’s really trying to do is end one faction or the other.”
If Labor were to win the election, the great incentive to prevent internal dissension from spilling over into public conflict would disappear in an instant, and Labor would be back in power.
donald trump
The US presidential election on November 5th looks increasingly likely to present Britain’s next government with a pressing problem: Donald Trump.
American populists could not be more different from Starmer, and their contrasting political outlooks and styles could make establishing anything like a beneficial special relationship a difficult task.
The Ukraine war has made this relationship more important than it has been in decades. Experts warn that the recent capture of Avdiivka in Donbas represents a significant territorial victory for Moscow and could tip the tide in Russia’s favor. There are also concerns that President Trump’s inauguration will provide further boost to Russian President Vladimir Putin. US Republicans have become reluctant to approve aid to Ukraine, and President Trump has promised to end the war within 24 hours, but how it will end remains unclear is.
And the risks extend far beyond Ukraine. Senior former diplomats spoke. I With President Trump in office, there is a real danger that America’s commitment to NATO will decline, precipitating “the most serious crisis in the history of the alliance.”
That could embolden Putin to look further afield, triggering a crisis that could overshadow recent disasters such as the pandemic and the war in Ukraine. President Trump has already said he would “encourage” Russia to attack any of the United States’ North Atlantic Treaty Organization (NATO) allies that he deems are not meeting their financial obligations.
defense spending
If President Trump were to actually reduce US support for NATO, there would be pressure on the UK and other members to make up the difference.
According to the latest estimates, the UK currently spends around 2.1% of its GDP on defence. But the commitment will be an even tougher choice for Labor, given the need to improve public services and uphold Mr Reeves’ “iron” discipline.
Shadow Attorney-General Emily Thornberry said last month that if Labor were to come in 10th to improve cost efficiency within the current defense budget, “we would start with a review”.
“We won’t know what the current state of public services is until we are elected, but then we will know and be able to make further decisions,” she said.
But if Putin and Trump’s actions go in the wrong direction for the UK, there could be pressure on Starmer to increase defense spending beyond a cost-benefit review.