We will have to build more prisons. The newly re-nationalised rail system will need extra investment. Long-suffering teachers and care workers deserve a substantial pay rise, child poverty has to be tackled, and of course the NHS needs yet more funding. It may be only three weeks since Labour came to power, but already the outlines of its plans for the first year are becoming painfully clear.
The party is attempting to persuade the public that, as Sir Keir Starmer put it at PMQs on Wednesday, Britain is in “a more severe crisis than we thought as we go through the books of the last 14 years”. By the time Rachel Reeves, the Chancellor, delivers her first Budget in the autumn, the case will have been made for a huge increase in public spending and the tax rises to pay for it. Middle England should brace itself to be eviscerated.
Just look at the evidence only from this week. The National Audit Office reported that HS2, or at least what remains of it, will be able to carry fewer people than expected, and that passengers might even have to be discouraged from trying to catch a train. Presumably the only alternative will be to start spending more on it again to boost capacity.
A separate report found that homelessness had hit all-time records, leading to calls for a “new approach” (in other words, more money). The pressure on prison spaces will mean that the criminal justice system will need more cash. A review of public sector pay has found that people working for the state deserve a substantial above-inflation pay rise.
Piece by piece, the picture is being put in place. Next week, Reeves is due to receive a report on the “true” state of the public finances. We can already guess what it will say. There is not enough money, and the only option left is to raise taxes to “invest” in repairing the UK’s broken public services.
As a political exercise, it is smart, if cynical. During the election campaign, Starmer and Reeves claimed time and time again that none of the main tax rates would rise. Income tax, corporation tax, and National Insurance were all off limits. They heavily implied that this meant taxes would not rise in the round.
Now they have found their way around this. They don’t seem to care that the traditional excuse of an incoming chancellor, that they could only “examine the books” once they were inside Downing Street, no longer ought to wash. For all its faults, the reports from the Office for Budget Responsibility mean that the “books” are open to anyone who feels like taking a look (although, as it happens, they are seldom pleasant reading). Labour is shamelessly trying to make the case that the situation is worse than they thought. With a sorrowful tone, Starmer and Reeves will announce that much more money is needed, and, inevitably, the broadest shoulders will have to bear the highest burden.
We can also see where the pain is likely to hit. We already know that private schools will be hit with VAT, perhaps as early as January, although that may end up costing the Treasury more than it raises. Pensions are clearly in the firing line, too, with restrictions on the tax relief on money you put in, as well as extra levies when you take it out, possibly with an exception for the NHS and the public sector so that it is only people working for companies that get squeezed. With £2 trillion sitting in the pension funds, it is the one huge pool of money that can still be plundered by the Treasury.