BORIS JOHNSON: Rachel from Accounts has been rumbled. It’s time for her to make her solution to HR and accumulate her P45 – or keep in China, the place they’re virtually as commie as she is…
There is only one commodity that really matters to the UK economy. It is the one resource upon which the whole country depends – every single one of us.
It is more vital to our national prosperity than every ounce of gold bullion in the Bank of England, or all the oil and gas in the North Sea.
As soon as that substance runs out, then every family in the land is faced with real economic hardship. That precious substance is trust.
I am talking about trust in the UK Government, trust in our economic policy; and above all, trust in the person who has stewardship of the nation’s finances – the Chancellor of the Exchequer.
There is one simple reason why global investors are pulling out of Britain, and why they are demanding ever-higher interest rates as the price of funding our borrowing.
There is one overriding explanation for the weakness of the pound, and why the Labour Government is being forced by the markets to pay more and more to service our debts, and why gilt yields have soared to the highest level since the crash of 2008.
I am afraid the mood is the same in Frankfurt, Tokyo, New York. The world’s bond markets are losing their trust in Rachel Reeves and her economic policy. They are losing trust because it is now evident that neither she nor Keir Starmer have a clear plan for growth.
Labour have done everything they can, since coming to power last July, to clobber business confidence. When they took over, they inherited the fastest growing economy in the G7. Reeves and Starmer set about demoralising – and sometimes demonising – the wealth creators in the UK and overseas.
Rachel Reeves meets Chinese finance minister Lan Fo’an in Beijing today
Rachel Reeves has got herself into a nightmarish position, in that her October Budget was so catastrophically ill-judged that it has scuppered her own plans for growth and reduced her own revenues, writes BORIS JOHNSON
Far from championing Britain and its potential, the new Government trash-talked the country and its fiscal position. Far from encouraging or liberating British business, they immediately announced a huge agenda of extra non-wage costs, new legislation to allow people to work from home and plans to prevent bosses from contacting their staff outside of office hours.
They have done nothing to take advantage of Brexit freedoms – on the contrary, they seem to be preparing to take the UK back into the sclerotic EU single market, so that we become a slave state, accepting laws from Brussels with no power to make them ourselves.
The global financial markets have lost trust in Reeves because they can see that she and Starmer are governing more like Jeremy Corbyn than Tony Blair – constantly striving to appease their union paymasters, constantly tacking to the Left.
They can read the news, these bond market fellows; they can see what is happening in Britain. When the Labour Government gave inflationary pay awards to train drivers and doctors, it did not go unnoticed. The world spotted that there were no improvements required in public sector productivity and took note.
When Reeves and Starmer decided to abandon reform of government, axing our plan to cut 66,000 Whitehall jobs, the world’s money markets observed and sucked their teeth. To retain credibility with the markets, you must show that you are willing to keep reforming, to keep fighting government waste and to keep a lid on spending.
Reeves has given the opposite impression. She has blown the trust of the markets because she seems to be a genuinely Left-wing class warrior.
To judge by her social media posts, Reeves positively exults in the destruction of fee-paying schools. One after the other, these independent schools are now closing down, brutally punished by the imposition of Labour’s 20 per cent tax – via the addition of VAT on fees – on education.
Britain is now an extreme outlier – no other country in Europe taxes schools in this way. It makes one weep, frankly, to see these old schools go to the wall. How does it help? Where is the tax yield from a school that has gone bust? How does it help the taxpayer, if these children must now be educated by the state?
This policy is nothing but Pol Pot-style levelling down and achieves nothing but to gratify the resentments of Reeves and Starmer (and never forget that it is a measure of the PM’s supreme hypocrisy that he actually had the benefit of a fee-paying education himself, albeit funded via bursaries).
The world’s markets have lost trust in Reeves because they are starting to think she really is an old-fashioned tax and spend socialist – and they are right.
Above all, they have lost trust for the same reason that any of us lose trust in another human being. She lied. And they can see that she lied.
She and Starmer went into the General Election last year saying they would not put up taxes on working people – and millions of people in British business felt deeply reassured.
They then shattered that promise in the October Budget by hitting companies up and down the country with a £25billion hike in National Insurance – a tax on the pay packets of every private sector worker in Britain.
By this stage British businesses already had their heads down. They had endured months of gloom and negativity from Reeves; but the Budget created a classic socialist doom loop. By walloping businesses, the tax hikes deterred investment and froze job creation. And by choking economic activity, they of course reduced tax revenues.
So that is why we find ourselves in this bleak position, at the start of 2025, with all the indicators flashing on red.
Jobs are being shed, business confidence is low, and unlike other countries, we cannot now hope for the obvious remedy – early cuts in domestic interest rates – because inflation is already so stubbornly high; pushed up, of course, by Reeves’s own policies of excessive taxes on wages, and excessive public sector pay settlements.
Rachel Reeves has got herself into a nightmarish position, in that her October Budget was so catastrophically ill-judged that it has scuppered her own plans for growth and reduced her own revenues.
The result is that she will almost certainly have to break her word again, because she will either have to cut spending, and infuriate her own backbenches, or else she will have to go back to the country, in the March Budget, and raise taxes again. Both options are bad; both would depress economic activity still further, not to mention tax revenues; and the death spiral will go on.
It is Reeves, and Reeves alone, who has created this shambles. It is she who has forfeited market confidence – and that is the one thing that no Chancellor can afford to lose.
She has made too many fiscal mistakes. She has no plan for growth. She plainly does not understand that the nation’s prosperity depends on a happy and confident private sector. She conned the public about her plans for tax rises, and about her own CV. She has been rumbled.
It is time for Rachel from Accounts to make her way to Human Resources and collect her P45. Or perhaps she could just stay in China, where they are almost as commie as she is.
I suppose Starmer can begin again. He has his absurd parliamentary majority. But he must begin again with a new Chancellor of the Exchequer.
