Someone had to pay. Is this a “class”-based budget, the chancellor is asked on the BBC? No, it’s raising money urgently needed for the NHS and all public services. Someone has to pay, and if not the best-off, then who?
Labour chose larger employers, those with more than four employees. And Labour taxed the well-off, those with capital gains and private jets, those joining the 7% with rental properties, and the families of the 7% of children in private schools. Even with the changes to inheritance tax (IHT) on farms and businesses, only 7% of estates are expected to be liable. Pension pots will now pay IHT – but they did previously, until George Osborne changed them as another gift to the wealthy in 2015.
Sad stories of the stricken rich have, frankly, been quite enjoyable to read. That’s not schadenfreude, but rather astonishment at their utter social obtuseness about inequality, cluelessness about their affluence, and ignorance of how they sound to most people. This was one of my favourites, from the Telegraph: “Labour has put the fear of God in everyone.” “Julie and John Macrae always dreamed of spending their twilight years sailing the world. The couple had planned meticulously for retirement, investing in 60 buy-to-lets in and around Colchester to supplement the pensions built up from their day jobs. What Mr and Mrs Macrae didn’t anticipate was being forced to sell up their boat and go back to full-time working at the ages of 67 and 77 respectively.” (Zoopla prices the average buy-to-lets in east England at £264,539). The cruelty of hitting “grieving” relatives with IHT has been a busy trope this week: does money relieve sorrow?
Tales of woe from farmers may wring voters’ hearts a little more: from infancy, farms inhabit the national imagination. Reportedly they will be tractor-riding into Westminster on 19 November, “in Furious Revolt Against Labour’s ‘Family Farm Tax’”. Perhaps by then, the actual facts will have permeated through to farmers and to voters: inheritance tax on farms touches only the most wealthy. James Dyson, owner of more acres than the King, blasts a “spiteful budget” in the Times, as he – like many landed dukes – hides behind imagery of income-starved sheep farmers driven off the land of their fathers.
But Paul Johnson, the director of the Institute for Financial Studies, is stern: the farmers story is “massively overdone”, with farms “still better treated than anyone else in terms of inheritance tax”. A couple inheriting a farm would get the same combined £1m inheritance untaxed as everyone, plus another £1m-worth each of farmland untaxed, and anything over that £3m is only taxed at 20%, or half the usual rate. Dan Neidle, of Tax Policy Associates, pulverises the Country Landowners Association’s claim that 70,000 farms will be affected, reckoning it may be only 100, and only the super-wealthy. “Very few people will be affected and it’s something they should be able to manage.” Manage how? By gifting farms long before death.
But here’s a warning: Farmers Weekly regularly covers novel-worthy tales of farming family lawsuits with a “growing number of succession cases ending up in court”. These “proprietary estoppel” cases are “costly, stressful, time consuming and generally do lasting damage to family members and to the business”. Beware avoiding taxes that way unless you trust your children (and their spouses) 110%.
Amid this backlash, remember budgets are very rarely welcomed. Labour is relieved that this gigantic tax-and-spend has not, as the Sun lied, caused “MELTDOWN” in the markets. Nor does Labour see meltdown in polling and focus groups. People are just relieved that it’s not as bad as they expected, with no hits to payslips, no fuel tax, no fiscal drag, with a good minimum wage rise for more than 3 million people. They get it that the wealthy and employers bear most, the IFS graph showing a steep gradient with the richest paying most, the poorest least. That’s why those such as Andrew Neil in the Mail damn it as a “fatally flawed and seriously socialist budget that dooms Britain to another lost decade”. Voters, however, rank capital gains and private schools among their top three choices for tax increases. Are they jubilant? No, of course not – but they feared worse.
Despite its huge majority, the government is not popular. It has lost council byelections, with a ward in Pat McFadden’s Wolverhampton constituency falling last week to Reform on a 36% swing. With the next election eons away, neither the personal approval ratings for Reeves and Starmer nor the party’s standing signify anything. “Don’t panic,” says Prof Rob Ford, as one poll gives the Tories their first lead over Labour in about three years: all governments hit that marker within months in office. “Thatcher was sooner, very unpopular in 1979, Blair took six months.” Stay calm, he tells the permanently jittery and miserabilist Labourites, so unlike the “breezy self-confidence of the Tories”. What matters now is tangible results, growth in pay packets, growth in the economy and growth in public services: monthly NHS waiting lists numbers will be the ineluctable measure of recovery, difficult as winter blows in. No-drama-Starmer’s strength is sticking to the course, as he did from day one, reshaping his party.
Don’t panic over the Office for Budget Responsibility’s miserly prediction of 2% growth: the main growth-drivers are still to come. In next week’s Mansion House speech, Reeves will shake up pension funds, pumping billions of investment into infrastructure. There is already the £63bn from Labour’s summit for private investors, and over the weekend there was the £500m investment in Cambridge’s biomedical research campus by Prologis. Still to come are planning laws to propel housebuilding: expect Angela Rayner to get reluctant developers’ spades into their landbank of 150,000 sites for homes already with detailed planning permission.
With the Bank of England expected to cut interest rates on Thursday, after years of political mayhem how oddly unfamiliar for Britain to find it has become a stable political environment for investors. France is in turmoil, the German government is tottering and the US perilously uncertain. Britain looks a good bet.
Many of the budget’s shrieking critics are the same ones who welcomed Liz Truss’s “mini-budget”. The Mail was not alone with “At last! A TRUE Tory budget”. The new Tory leader, no fool, may take a different approach and try to pivot towards the centre to reclaim lost southern seats. But would that party’s claque of fanatics allow her? If all she can do is attack this tax-raising budget, she will need to answer Labour’s riposte: “What public services would you cut, then? What would you do?”
