Rachel Reeves can’t win, can she?

[anothervoter]

After days and days of negative press and chatter about income tax going up, complaints on Mumsnet and across the media, today’s reports are that idea might be dropped and now she’s being accused of rattling the markets and making the cost of borrowing increase.

Honestly, genuine question- what can she do?

I really don’t think that’s what anyone is arguing. I think this is a point of difference about how you create fiscal headroom.
many think (me included) you need to stimulate an economy through reasonable levels of taxation (that are predictable) to encourage investment and spending. Business won’t invest in growth in this type of volatile environment.
Whilst also controlling spending levels.
By doing that you can spend tax receipts on providing great public services.

Its good to debate.

We have a run down country, one reason growth has stagnated.

We cannot borrow for obvious reasons, so the money to stimulate growth has to be raised by taxes eg building the conditions for business to flourish, such as my tech college example, another would be state subsidy to improve port facilities, enabling exports to export.

There are credible economic models that state that using taxes to stimulate growth will work and has worked.

Yep.

Yep totally agree, i'm not advocating post war levels of taxation & money spent on UC obviously doesn't increase growth.

The pp has said only tax breaks create wealth and not public sector investment, paid for by taxes, sometimes increased taxes.

I ve suggested we need both but he/she doesn't accept this.

Its a chicken and egg situation. Which comes first. The wealth creators or the environment to facilitate that wealth creation.

But growth can only come from the creators of the wealth. And public services will support that but not create the wealth in the first place. That wealth belongs to the private sector and the state decides how much it wants to take in tax to pay for the public services.

RR will need to chose. High taxes will take wealth out of the private sector but also hamper the ability of those wealth creators to chose what investment needs to be made in their company to grow it. She may therefore decimate the private sector in order to support the non wealth creating public sector (pensions, benefits etc). The public sector will fail if the private sector cannot finance it. Something cannot be created out of nothing.

Whilst theoretically you are correct that a business could not grow without a transport infrastructure, you miss the rather obvious point that there already is a transport infrastructure within the UK. Of course it could always be better/ quicker etc but that provides ever decreasing returns on the investment for example a 5% quicker journey time does not equal a 5% economic growth.

Instead I would argue that the biggest problem for the UK economy is that we have the highest energy prices in Europe simply because the subsidies for renewables and net zero are paid for by levies on businesses and consumers energy bills (one third of total cost) rather than out of general taxation.

No economy anywhere in the world has managed economic growth with high energy costs.

Ahh the chart I was looking for:

Reeves and Starmer thought £70bn should do it in terms off a one of tax hike, but it has disincentivised business and people are leaving.

They still don’t get why this is happening because if you follow the investment logic then there shouldn’t be a bigger hole a year later.

They only know half the equation, and don’t get the private sector or what people respond to well hence the problems they’re facing.

Well, you ve moved from your earlier pov.

I'm not disagreeing with you as such, just that we need both and in many cases, the state part comes first.

Again, yet again, it was not a £70bn tax hike.

The UK has growth too, one of the highest in the G7 and tax receipts up, so one could argue their policies have not had the effect you say they have.

Have you read the report on the UKs defence situation? a "glacial pace" is its conclusion in making the UK safe, Labour inherited this from the Tories.

So 10s of billions need to be spent on the military, where do you think this money might come from?

or do you think we shouldn't raise taxes & not spend on defence and just hope we can rely on Trump?

Socialists particularly ones that have never been in business (which is the current Cabinet) will be unable to understand the private sector. Which is why they are making such stupid decisions.

We unfortunately have really low calibre politicians at the moment who seem to fixate on something (eg Ed Milliband and net zero, Bridgette Philipson wanting to stamp out excellence in schools) and seem unable to balance their obsession with the interests of everyone else in the country. And they have the powers to wreck the country. Power which is being wielded by narrow minded, idealogical fools.

Defence is something I actually do agree we need to spend money on as it affects us all. And defence is the first and main duty of a government.

From Boris Johnsons manifesto promises in 2019:

Reaching Net Zero by 2050 with investment in clean energy solutions and green infrastructure to reduce carbon emissions and pollution.

Yet its all to do with Miliband.

There’s just no understanding. I get that they might be swayed by someone saying pump £70bn in taxes and borrowing and you’ll see returns etc but they’ve blanked out an entire half of the equation. They don’t get behavioural impact.

They’re baffled by the outcomes and the strain is showing.

Where from?

Even with your suggestions on growth, if they worked, its years away before the economy can pay for any of this.

So Reeves needs to fund this through taxation.

Boris Johnson was wrong. And Ed Milliband is continuing being wrong too. But he's a genuine fanatic whereas Boris was just being encouraged by Carrie.

Both wrong.

They need to prioritise. Get shot of all the spending that is counter productive (benefits for everyone who asks for example) and invest in the important stuff. It will be no use having amazing trains if the country is invaded by a load of Russian rapists.

I happen to agree with you, some of the Co2 taxes just closes down UK business and we then import the CO2 emissions.

The subsidising of EVs, more and more of which are from China, is absolutely bonkers.

China is providing Electric buses to Europe that have a built in "off" button, controlled by China, their collection of data is scary.

Even with the most draconian benefit cuts, unless you want a return to the Poor House, will not provide the amounts required on defence.

Defence spend needs to double, thats around £130 billion.

Additional taxes is the only way to do this.

I have to go to work now.

Defence is not even in the list of the highest state expenditure. And yet it is the most important.

As I say. We need to prioritise. And if we get invaded due to inadequate defence we will have chosen the wrong priorities but by then it will be too late. And its not as if the US aren't removing troops from Europe...

Debt servicing is costing us more than defence. That’s a major issue.

@Southernecho, tax receipts are up because we are a now high tax economy. But where is the growth? Tax receipts are up because more money is being taken from “working people” and businesses. Yet to see signs of investment and growth.

Unsurprising really.

The Secretary of State for Defence, Ben Wallace, announced on March 22 that the army will be reduced to 72,500 by 2025. This is set out in the Defence in a Competitive Age command paper.

This means the existing target of 82,000 personnel, set in 2015, has been scrapped.
https://commonslibrary.parliament.uk/uk-army-to-be-reduced-to-72500/

There is infinitesimal growth because Labour does not fundamentally understand how to manage the levers of growth. Employer NICs was a classic example of this.

Labour is a tax and spend party so while, yes, tax receipts may be slightly up (3.7%), most of that will be wiped out on the welfare state. Remember, the Labour backbench rebellion on welfare wasn't even over welfare being cut - it was over increased spending on welfare being slowed down. I'm not sure all of them even understood that.

@TeenagersAngst, you have nailed it! “Labour does not fundamentally understand how to manage the levers of growth”.

This government and the one before show no ability, no competence and increasingly no desire to commit to growth.

We are drifting towards becoming a low productive, low incentive, low capacity country, run by amateurs.