Rachel Reeves’ Big Gamble: A £40 Billion Bet, No Affordability Check, and a Whole Lot of Magical Thinking

Rachel Reeves unveiled Labour’s October 2024 budget with all the optimism of someone who’s just stumbled upon a secret stash of taxpayer cash. Her grand promises—£40 billion in green spending, £25 billion extra from employers’ National Insurance, billions for the NHS, housing, and education—make for impressive headlines. But as she piles on the pledges, one question remains conspicuously unanswered: where’s the affordability check?

In a world where the rest of us can’t even place a modest bet at the bookies without someone asking if we can afford it, Reeves seems to think affordability checks are optional. And here’s where the humour turns dark: it’s not just Reeves. Try finding anyone on Labour’s front bench with even a modicum of private sector experience. It’s harder than spotting a northern leg of HS2. The very people deciding the fate of British businesses are the ones who’ve spent their entire careers shielded from the realities of private sector budgets, profitability, and—yes—basic accountability.

And here’s the real kicker: despite a household income nearing £400,000, Reeves recently admitted she struggles to balance her own budget. Not to mention the little incident of her parliamentary credit card being suspended over a £4,000 unpaid bill. Yes, the same person now overseeing Britain’s finances couldn’t keep track of her own expenses. It’s like asking a teetotaler to run a distillery: what could possibly go wrong?

The National Insurance Tax Hike: £25 Billion, But No Plan for Growth

First up in this budget bonanza is the big tax-raising measure: a hike in employers’ National Insurance contributions from 13.8% to 15%, coupled with a reduction in the threshold where companies start paying from £9,100 to £5,000. This is supposed to bring in £25 billion a year, making it the biggest single tax-raising measure in the budget.

But here’s the catch: businesses—who, let’s remember, actually create jobs—are being handed a colossal tax increase just as they’re also expected to spearhead the “growth and productivity” Labour keeps promising. Raising taxes by £25 billion and expecting productivity to flourish is like taking the wheels off a car and expecting it to go faster. With barely a Labour front-bencher who’s ever run a business, it’s no wonder they think businesses can just absorb the hit and keep hiring.

Capital Gains and Inheritance Tax: Squeeze the Wealthy, But Not Too Much

Reeves also threw in some tweaks to capital gains and inheritance tax to keep up appearances. The lower rate of capital gains tax is set to rise from 10% to 18%, and the higher rate from 20% to 24%. Meanwhile, inheritance tax is getting a freeze on the £325,000 threshold until 2030, along with a new 20% tax on business and agricultural assets over £1 million.

These changes are meant to close “loopholes” and raise a few billion here and there—about £2.5 billion from capital gains and another £2 billion from inheritance. But here’s the thing: those with real wealth are rarely this passive about their finances. And in a private sector-driven economy, raising taxes on investment without an affordability check isn’t so much clever budgeting as it is wishful thinking. Reeves seems blissfully unaware that people don’t just sit back and pay up—they call their accountants.

Income Tax Inflation Link: The Rabbit That’s Not Quite There

In a move that feels almost sneaky, Reeves announced that income tax thresholds will start rising with inflation…in 2028. This adjustment is technically a tax freeze for working people, but only just before the next election. It’s like pulling a rabbit halfway out of the hat, waving it about, and hoping people don’t notice it’s still mostly in the hat.

This is Labour’s version of keeping promises: delaying them. It allows Reeves to say she hasn’t raised personal taxes while still pulling in billions through other means. But for the next four years, workers will still face frozen tax bands, all while Labour’s grand plans for growth somehow carry on as if this small concession will pay off in the future.

Minimum Wage Increase: Helping Workers, Hurting Employers?

Then there’s the boost to the minimum wage, which Reeves has hiked by 6.7% to £12.21 per hour for over-21s. This increase is a quick win for workers struggling with rising costs—no doubt about it. But at the same time, Reeves is handing businesses the largest tax hike in recent memory with her National Insurance rise. In Labour’s world, employers are somehow expected to pay their workers more, absorb billions in new taxes, and then magically increase productivity.

Anyone who’s spent time in the private sector would see the contradiction here: companies can’t just print money. But Labour’s top team, whose CVs look like a directory of public sector careers, seem to think that private businesses have endless pockets. Raising the wage floor might look good on paper, but in practice, it could stifle the very job creation they’re banking on.

The NHS Boost: A £22 Billion Check with No Real Plan

Reeves’ biggest spending pledge is a whopping £22.6 billion increase to the NHS day-to-day budget, alongside a £3.1 billion capital investment. Now, as anyone who’s seen the state of our health service can tell you, this is desperately needed. But Labour’s plan hinges on achieving 2% productivity growth—a figure that seems plucked from thin air.

If Labour had any private sector experience, they’d know that “productivity” isn’t something you achieve by pumping more money in. It requires deep structural reforms and efficient management—two things the NHS has struggled with for years. This budget is a prime example of a public sector mindset that thinks productivity can simply be decreed. But without structural changes, it’s a bit like putting petrol in a car with a broken engine and wondering why it’s not moving any faster.

Fuel Duty Freeze: A £3 Billion Gamble

In a nod to drivers, Reeves announced a freeze on fuel duty, keeping the previous government’s 5p cut in place. This freeze will cost £3 billion—a huge sum in a budget already stretched to the limit. Politically, it’s a crowd-pleaser, especially for working-class voters reliant on their cars. But economically, it’s another gamble in a budget that’s becoming a high-stakes night at the casino.

In the private sector, you’d be grilled for adding this to a budget already heavy with risk. But Reeves, who’s spent her career far from the realities of corporate finance, sees this as a simple line item rather than a costly liability. She’s spending as if someone else will cover the tab—and unfortunately for the rest of us, that someone else is the taxpayer.

Private School VAT: A Popular Punch, but Who’s Paying?

Then there’s the crowd-pleaser: VAT on private school fees from January 2025. The polling is clear—people love the idea. But this move could end up pushing more students into the state sector, putting additional pressure on already stretched public schools.

In the private sector, any sensible planner would run the numbers to see if this new revenue might cost more in state school funding. But Labour seems happy to push this policy through without an affordability check. It’s the kind of decision you make when you’re shielded from the real financial impact, as Labour’s career public sector front-benchers seem to be. Raising a tax is easy; managing the fallout, less so.

Public Spending Increases: A Massive Shopping List, No Receipts

Finally, we have the massive public spending pledges: £6.7 billion for schools, £5 billion for housing, £2.9 billion for defence, and £1.3 billion for local government. In any private company, this kind of spending spree would trigger an immediate affordability review. But Labour seems to think it can just ramp up borrowing and call it an “investment,” hoping that growth and productivity will just appear out of thin air.

For people who’ve spent their lives in the public sector, this “just borrow and build” mentality might seem reasonable. But anyone in business knows that borrowing without a plan to repay is a fast track to bankruptcy. Growth doesn’t happen because you hope for it—it requires investment that’s affordable, targeted, and sustainable.

The Final Affordability Check – For Everyone Except Labour

In the end, Reeves’ October 2024 budget is missing the very thing that most financial planners would demand: an affordability review. If an everyday Brit tried to take out a loan with this kind of risk, they’d be sent packing. Yet here we are, with Labour betting the country’s finances on promises of “productivity growth” without any clear mechanism to achieve it.

For a Labour front bench that’s spent its life in public service, borrowing billions must seem as easy as making tea. But for taxpayers, who’ll ultimately pick up the tab, this budget isn’t just ambitious—it’s a financial thrill ride without a seatbelt. Labour’s betting big without understanding the private sector reality that, eventually, the bill comes due.