ALEX BRUMMER: I’ve never been this concerned that the person nominally in charge of our economy is so out of their depth
Rachel Reeves had the opportunity to rise to the occasion yesterday. Instead, she treated us to yet another of her now-familiar flops.
The Chancellor’s fumbled, feeble response to the greatest energy crisis to hit the British people since the 1980s seems set to condemn our country to surging inflation, higher borrowing costs and an ever-worsening economic slump.
Never have I been so concerned that the person nominally in charge of the British economy is so manifestly out of their depth and out of ideas. A confident chancellor would have introduced a suite of measures to tackle the swirling threats we all face, or would have at least made clear why inaction was better than acting in haste.
Instead, Reeves used her Commons statement to launch a limp, Leftist attack on alleged ‘profit gougers’ and to repeat for the umpteenth time her tired jibes against the Liz Truss mini-Budget in long-ago 2022.
Reeves has been Chancellor for 439 days while Truss was PM for just 49. It is now time for her to take some responsibility for her own poor decisions, and drop these spineless, inadequate and overtly political responses to an unfolding global catastrophe.
As a university student, Reeves eccentrically decorated her digs with a poster of Gordon Brown. For all his faults, her predecessor as Labour chancellor would have been ready with a range of measures to stabilise the economy and prevent scarring to business and growth.
Rishi Sunak, who did Reeves’ job during Covid, would have been no different. Indeed, it was the Tories who bailed out consumers to the tune of billions after Russia invaded Ukraine, which led to £40billion of subsidies which burden the public finances to this day.
So what could – or should – she have done? Her first and best move would have been to overrule the ruinous and dangerous green fanaticism of Energy Secretary Ed Miliband and power up North Sea oil and gas production. This would have swiftly eased market concerns about Britain’s troubling dependence on gas shipments from Qatar (currently stuck in the war-torn Arabian Gulf), and natural gas from Norway.
The Chancellor’s fumbled, feeble response the energy crisis seems set to condemn our country to surging inflation, writes Alex Brummer
New investment in drilling, production and refining from the North Sea has been crippled by a punitive 78 per cent levy on drillers, among the highest in the Western world. (And this from the woman who seeks to lecture others about ‘price-gouging’!)
Labour and as its faithful lackeys in the Left-wing media claim that removing the tax and lifting the bar on new drilling would have no impact on the cost of filling your car or your central heating bill, because prices are ‘set at a global level’.
That is balderdash and disingenuous. An intelligent schoolgirl could work out that the more gas drilled closer to home, the more secure a country’s gas supply, the lower the price for everyone and the greater a nation’s pool of energy in times of volatility. Either Reeves truly can’t understand this, or she is pretending not to. Neither leaves her fit for the job.
The second measure she should have made was to show the bond vigilantes that she is serious about reining in spending. Britain is already shelling out more than £100billion a year on debt interest – a totally unsustainable rate.
Among the immediate steps Reeves could take would be a freeze on public sector pay and hiring, both of which have soared since her party came to office. (Unemployment in the private sector, meanwhile, has leapt to 5.2 per cent of the workforce.)
Similarly, the welfare budget has exploded to gargantuan levels, and now exceeds the entire income tax take for the country. As well as being utterly unaffordable, this cruel policy choice is trapping millions of people to leave them languishing, often for life, on benefits: a miserable existence, but one likely, in the cold arithmetic of politics, to ensure a larger voter base for Labour.
Third, the Chancellor could have taken crucial steps to boost entrepreneurship and enterprise. Small businesses would receive an immediate uplift if spiteful inheritance-tax changes targeting family enterprises and sole traders were lifted.
Abolishing stamp duty on share trading – which is driving businesses off shore, especially to New York – could boost investment in listed British companies. Indeed, wealth creators, thousands of whom have decamped to Dubai, Milan and elsewhere to escape Labour’s vicious tax assault, could be tempted back by a temporary HMRC amnesty.
The markets are now betting that the Bank of England will hike the base rate at least twice this year. That would kill dead the green shoots of a cyclical recovery hoped for by many economic commentators. Bank governor Andrew Bailey must hold the rate where it is – or even cut borrowing costs – to provide a much-needed safety net. Boy, with Reeves in charge, do we need it.
