That’s a big jump, and a reflection of much better growth rates this spring than had been forecast at the start of the year. By the time Reeves’ Budget rolls around at the end of October another rate cut is likely to be around the corner, and there will have been some time for the benefits of higher growth to sink in.
In theory, this is all fantastic news for Labour. The Tories’ election timing was a gift to the then opposition: the sacrifices and reforms made by the Conservatives didn’t settle in time to benefit in the election, and now Labour get to claim the outcomes and reap the benefits of a better-than-expected economy in the second half the year.
But how can Reeves reconcile that with her insistence the inheritance is disastrous and tax rises are needed? Revised estimates for the cost of borrowing should show a reduction in debt-servicing payments (last forecast at £89bn this year). Better growth should give the Chancellor more fiscal headroom.
This is where the £22bn proves so useful. It’s the kind of sum that good news can’t cover. That almost half of it is made by Labour’s first major spending decision – to grant inflation-busting pay raises in the public sector – is neither here nor there, so long as their Opposition remains rudderless and unable to fully take the political fight to the Government.
“They’re doing this because Labour knows it is going to start to put up tax,” says one member of the shadow cabinet about this week’s events. “They have to find a reason to explain to people they have to go back on their word.”
Both Labour and the Tories announced unfunded spending in their manifestos (not least the NHS long-term workforce plan, which is going to cost staggering amounts of money if implemented in full). No doubt Labour will want to be able to offer up more of their own agenda, too, which eventually would remove the two-child benefit cap.
That’s all going to require money – and with a landslide win, Labour can certainly make the case that it’s worth increasing taxes to secure. But the better the economic outlook, the harder it may be to justify tax rises based on the idea that the economy is struggling to stay afloat and the public finances are on the brink.
For Labour, the plan was always to blame Tory incompetence. And it was a near-foolproof plan, until the good economic news started rolling in.
Kate Andrews is economics editor at The Spectator