JEREMY HUNT: Don't underestimate the anger of voters facing tax rises (2024)

This week we got two very big clues about the kind of government that was elected on July 4. Firstly, we learned taxes will be going up.

We knew it all along, of course, and warned people – although I accept we were beaten fair and square in the election. However, after being told taxes would not go up more than 50 times, decent folk will be astonished at the speed at which Labour’s promise has been broken.

A mere 26 days after being elected, the new Chancellor Rachel Reeves revealed to the News Agents podcast: ‘I think we will have to increase taxes in the Budget.’

Secondly, we have witnessed the ruthlessness with which Labour will attack anyone who challenges its official ‘narrative’.

After I explained to the House of Commons why the Chancellor was wrong to claim she had inherited ‘the worst set of economic circ*mstances since the Second World War’, a claim no respected independent economist is prepared to defend and why there was no £22 billion ‘black hole’ – according to the figures she had given parliament days earlier – she chose not to answer the questions I had asked.

Instead, she took to the airwaves to brand me a liar.

Politicians can and do have disagreements. But politics needs a degree of civility in the way we conduct debates.

It is a principle I have always tried to follow, which is why I am not going to throw the same accusation back at the Chancellor. Let’s just say this: if Labour plans to conduct arguments by presenting ­fictitious documents to parliament and shouting ‘liar’ at anyone who dares to ­disagree, that is a sinister step ­backwards for our democracy. It is not too late for wiser counsel to ­prevail and I sincerely hope it does. In the end we all know such insults are what you revert to when you run out of arguments.

And there are no arguments to defend this spurious ‘£22 billion black hole’ claim.

That doesn’t mean there aren’t pressures on the Budget – there always are, particularly so after a pandemic and energy crisis. But it is the job of Treasury ­ministers to manage those pressures so that we ­continue to live within our means.

Let’s look at the detail. The biggest element of the ‘black hole’ is a sum of more than £9 billion – caused by Reeves’s decision to give three-times inflation pay awards to public sector workers. In the case of junior doctors, the pay rise was more than ten times inflation. She did this without asking for any productivity improvements in return.

Last year we made a different choice. We told the unions that, if pay was to go up by more than inflation, there must be improvements in productivity to help pay for the cost.

It was not easy and our government had to face a summer of industrial action. But we were able to negotiate several important changes.

Reeves has chosen an easier path, which as Chancellor she is free to do – but she should not seek to lay the blame for the consequences on someone else.

The second biggest element in Reeves’s ‘black hole’ is an asylum bill of more than £6 billion. The reason this number is so high is because Labour chose to cancel the Rwanda policy – crystalising the up-front costs but realising none of the benefits. That includes the billions that could have been saved from deterring people from coming here in the first place.

To their credit, Labour were open about their plans to cancel Rwanda ‘on day one’. What they weren’t open about was its cost.

The Chancellor wants us to believe that these figures can be blamed on her economic ‘inheritance.’

But the numbers presented to parliament in a budget are approved by civil servants – who would have been breaking the Civil Service Code if there had been an undisclosed ‘black hole’.

The Permanent Secretary at the Treasury would have required a ministerial ­direction to enact such a ­policy. But there was no such policy.

Having worked closely with Treasury civil servants for nearly two years, I can vouch for their complete integrity. No deception occurred and it debases our politics to suggest it did.

That’s why any claim of a hidden ‘black hole’ is simply not credible.

With £8.3 billion for GB Energy, £7.3 billion for the National Wealth Fund and pay awards of more than £9 billion, Rachel Reeves has notched up spending commitments of around one billion pounds for every day she has been in office. She has chosen to add to the financial pressures she faces. And that can only mean one thing: tax rises. Every Labour government in history has increased taxes.

After the pandemic I too had to increase taxes, regrettably, to pay for the extra support we gave families.

The difference is that, as a ­Conservative, I was prepared to do the hard work necessary to bring taxes back down again.

But Labour has a different world view. They think that ‘redistribution’ matters more than growth, which is why they always start with tax rises and hope the growth will follow.

Yet to do so flies in the face of what we see from around the world. Many countries with lower taxes have higher growth than us.

Economists argue about whether this is cause or correlation but Conservatives know there is a link.

A more lightly taxed economy will produce a bigger private ­sector, more investment and, ­ultimately, more tax revenue for public services.

By hiking taxes so quickly, the new Chancellor will do enormous damage to an economy which the ­International Monetary Fund ­predicts will be the ­fastest ­growing major ­European economy.

Labour knew they didn’t want to pursue the Rwanda scheme. They knew they wanted to give generous pay rises to the unions. They knew they would not have the stomach to curtail a ­ballooning welfare budget.

In short, Labour knew very well they would have to put up taxes.

They shouldn’t ­underestimate the anger of an electorate now faced with tax rises they were promised – more than 50 times – would not happen.