Reeves’ Spending Review: Spend now, tax later?
Cash will be splashed across transport, energy, and healthcare under plans laid out by Chancellor Rachel Reeves in her Spending Review.
Reeves described the plans, which will see an extra £190bn in government spending, as “a credible plan for the renewal of Britain.”
But Shadow Chancellor Mel Stride warned the spending splurge would spark tax rises in the Autumn budget, describing the Spending Review as a “spend now, tax later review.”
Reeves told MPs that “at the budget last October and again in the Spring I made choices necessary to fix the foundations,” adding that “we are starting to see the results.”
She said that the decisions unveiled in the Spending Review, described as “my choices, Labour choices” aimed to ensure that Brits have the “opportunity to succeed after 14 years of mismanagement and decline by the [Conservatives].”
“Total departmental budgets will grow by 2.3 per cent per year in real terms,” Reeves said, comparing this to Tory figures which saw spending go down by 2.9 per cent per year in 2010.
The Chancellor championed “stability” in an “age of insecurity.”
Tories fight back
According to Stride, “Labour has quietly loosened its own fiscal rules,” resulting in “more than £30bn in additional annual borrowing, fuelling a deficit now 70 per cent higher than what was forecast under the final Conservative budget.”
Stride implied more U-turns might be necessary, and called Labour MPs “disillusioned” while the PM is “panicking.”
The Chancellor’s “deluge of taxes and regulation left business confidence at record lows, costing people their livelihoods,” the Shadow Chancellor warned.
Third sector warns of tax rises
Maxwell Marlow, Director of Public Affairs at the Adam Smith Institute, warned that tax rises might be necessary to fund Spending Review promises, though Reeves has refused to be drawn on decisions ahead of the October Budget.
Marlow argued that “without cuts to red tape, the economic growth required to generate the necessary tax revenue simply will not materialise.
“As the state continues to balloon in size, the government must remain vigilant in ensuring taxpayer money is spent wisely.”
Harry Quilter-Pinner, executive director at Institute for Pubic Policy Research, said: “Even after the Budget, which raised taxes and increased borrowing, the government still had to make tough choices today.”
“In other areas we have yet to hear how the government will solve the big challenges facing the country: social care, universities and local authorities all face tough years ahead after years of under-investment and cuts,” Quilter-Punner said.
“If the government wants to tackle these challenges, as voters expect it to, it will have to look again at taxes over the coming years.”
Stephen Millard, interim director at the National Institute of Economic and Social Research said the chancellor’s ‘non negotiable’ fiscal rules will likely result in tax rises, on account of the “small amount of headroom at the time of the Spring Statement and the increases in spending announced since then.”
Reform shout-out
Early on in her speech, Reeves criticised Reform’s clutch MPs – who, critics note, could ‘fit in a Nissan Micra’ – as having “racked up £80bn of unfunded commitments” since the elections. “They are simply not serious.”
Reeves took another swing at the Reform party, adding that “we must have a strong NHS, not, as the Reform Party have called for, an ‘insurance-based system,’ but a publicly funded National Health Service, free at the point of use.”
On Tuesday, Reform named former NHS doctor turned TalkTV personality David Bull as their new chairman. The Labour party criticised Bull for having “parroted Nigel Farage’s plan for an insurance-based healthcare model which would leave working people paying thousands for routine healthcare treatment.”
London loses, Mayor says
After lobbying to extend the DLR to Thamesmead, and the Bakerloo line to Lewisham, London Mayor Sadiq Khan got a mixed deal.
Reeves announced that Transport for London will receive a four-year settlement though Khan expressed disappointment in the absence of infrastructure investment in the capital.
“Projects such as extending the Docklands Light Railway not only deliver economic growth across the country, but also tens of thousands of new affordable homes and jobs for Londoners,” Khan said.
The mayor added that he is “concerned that this Spending Review could result in insufficient funding for the Met and fewer police officers.”
The Spending Review focused on getting money to regions.
“Past governments have underinvested in towns and cities outside London and the South East,” Reeves said.
An additional £3.5bn of investment was announced for the Transpennine Route Upgrade linking York, Leeds and Manchester. Railways in Wales will get £445m over ten years.
More broadly, £52bn will be allocated to budgets in Scotland, £20bn for Northern Ireland and £23bn for Wales.
Lib Dems chime in
The main concern for the Lib Dems was health and social care.
Deputy leader Daisy Cooper attacked both main parties, stating that the Spending Review constituted “a missed opportunity to repair the damage done by the Conservatives and finally deliver on the promise of change.”
For Cooper, “putting more money into the NHS without fixing social care is like pouring water into a leaky bucket.”
She also warned that “local government budgets remain at breaking point.”