Looking back: A brief critique of the chancellor's economic policy

The UK Labour Party’s term in government has been filled with U-turns and inconsistencies from welfare to protestors rights to tax, making their desired two term rule as stated on July 4th 2024 more and more unlikely.

Following Labour's landslide victory in the summer 2024 election, Starmer placed Rachel Reeves to the government as Chancellor of the Exchequer. Making her the first woman to hold the position. Despite this modern look from the government, people are still suffering the same and by spring, Reeves released the spring statement where she introduced cuts to PIP, Personal independence payment, which was predicted to save the Treasury £5 billion a year. Despite this action to save, it was quickly reversed and changes to the welfare bill were introduced to avoid a Commons defeat. After stripping the PIP changes out of the bill completely, statistics brought by the Resolution Foundation have stated that there will be no savings for the Treasury in 5 years time, leaving a £5 billion hole in the Chancellors Plans.

Reeves U-turned again on her decision on the cutting of winter fuel allowance, estimating to cost £1.25 billion to the public purse, a turn that has been estimated to swallow most of the £10 billion the Chancellor created against her fiscal rules at her spring statement in early 2025. Despite this, the British people have been comforted by the reminder that Labour will promise to keep their tax promises made in their 2024 manifesto. This was stated by Cabinet Office Minister Pat McFadden to the BBC at a time when tax rises became increasingly likely. By July 2025, Labour has ruled out tax rises, VAT, and employee national insurance. This has been a comfort for the British people as Labour have valued their election manifesto as a blueprint to their economic policy. However, many analysts, such as Jeremy Hunt, think that in order to encourage growth there needs to be an extension on the freeze on income tax and national insurance thresholds for an additional two years. Although it was stated that there will be no extension of freeze in income beyond that has been made already from the previous Conservative Government, as Reeves states that any more would hurt working people. With the different routes to plug the “blackhole” left by the Conservatives, many political advisors, analysts and Politicians are arguing against the pathway taken by Reeves.

For example, former chancellor and PM Gordon Brown has recommended a billion pound levy on gambling companies to fund the lifting of the two child limit on benefits while left wing Labour MP’s are calling for a wealth tax.

By the summer of 2025 there were frequent attacks from the media and other parties on the Chancellor's control of the public purse. Conservative Party leader Badenoch threw her own party member Liz Truss under the bus in early August by stating that Reeves has not learnt from the mistakes of her mini-budget. Conservatives have further stated that Britain is entering a debt spiral, backed by warnings from the International Monetary Fund, and says the reversal on 5 billion of cuts to sickness benefits has added more pressure to the public purse and the fear of tax rises. Billionaire US hedge fund investor , Ray Dalio, has further warned last week that the UK has entered a doom loop of higher taxes and low growth.

As summer draws to a close Reeves announced the Autumn budget to be released 26th November and has ruled out the possibility for a wealth tax to come with it. With Reeves under pressure to plug a 20 billion “blackhole” by her Autumn budget, the additional manifesto promise to not increase taxes is seeming unlikely particularly with her only comment on taxes to be to not introduce a wealth tax: hurting working people the most.

Professor of Economics at the University of Warwick, Arun Advani, has argued against Reeves’ policy by stating that a wealth tax could help Reeves plug the fiscal deficit. Advani has stated that even a 1% annual wealth tax on assets worth more than £10 million could raise close to £12 billion annually. Wealth tax campaign group, Tax Justice UK, has further backed this by stating a wealth tax would impact 20,000 people, 0.04% of the UK population. Despite this, the Office of Budget Responsibility fiscal watchdog has supported Reeves by arguing that if the Treasury had an increased reliance on an extremely small and mobile group of tax payers it was a great risk to public finances.

Ultimately, regardless of the Chancellor's policies over the past 18 months it must be

understood that this government has come to power after years of economic instability and a lack of growth. Yet, businesses and working people must not be stood up particularly during the cost of living crisis.

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