The Chancellor is in a state of dangerous confusion over, of all things, work and workers.
Behind the horrible Budget Rachel Reeves is plotting are two big problems: the UK’s persistent poor productivity performance since the financial crisis, and the high levels of economic inactivity following Covid.
To prosper, the nation needs a work ethic. The country cannot afford to have more than 9m people of working age out of the labour force.
Sir Charlie Mayfield, the former John Lewis boss, is expected to publish a report this week, backed by the Government, on the theme of Keep Britain Working.
The aim is to tackle the surge in people leaving jobs due to sickness or disability, many of them young adults citing mental health issues.
The report is very laudable and necessary. But how does it square with the way Labour is making life so much harder for employers?
Shortfalls: At the same time as she is punishing individuals for earning a bit more than average, Chancellor Rachel Reeves (pictured) is reducing employers’ incentives to hire
Even Left-wing think-tank the Resolution Foundation admits the workers’ rights bill is likely to put firms off hiring.
Young people are suffering. There are nearly a million not in work, education or training. Even before further changes in the Budget, hikes in the minimum wage and employers’ National Insurance have pushed up the cost of hiring 21-year-olds by 22 per cent, 18-year-olds by 41 per cent and 16-year-olds by 54 per cent.
Bosses in the retail and leisure sectors, where many have their first taste of working life, are begging the Chancellor for mercy.
You could hear the emotion in the voice of Tim Richards, who runs the Vue cinema chain, when he pleaded on the Radio 4 Today programme yesterday with Reeves: ‘Please don’t touch us again.’
In the middle of all this, Labour wants to deny that anyone who makes more than £46,000 a year is a worker at all.
The sophistry is presumably intended so Reeves can launch a tax raid on this group whilst claiming not to have violated the manifesto pledge to spare ordinary working people. At the same time as she is punishing individuals for earning a bit more than average, Reeves is reducing employers’ incentives to hire.
This is a recipe for turning the UK into a desert of low skills, low productivity, low pay and even lower aspirations.
Nigel’s reality check
I can see why Nigel Farage’s promises for the economy had electoral appeal, though I am not fond of his brand of politics.
Some of his ideas are sensible, such as not persecuting rich people and scrapping Stamp Duty on shares.
The threshold at which people start to pay income tax, frozen at just £12,570, is too low, just as he says. It would be lovely to lift it to £20,000 as he suggested in his manifesto – and he is right to want to encourage ‘Alarm Clock Britain’.
Yes, it would be great if big tax reductions could be funded by cuts in spending, though the nature of these was not quite clear, and Elon Musk might have told him it is easier said than done.
Farage has now backed away from his big tax-cutting pledges, saying they were aspirations only.
This may signal he is trying for a more credible and statesman-like approach to the nation’s coffers than simply throwing out promises like confetti.
He is absolutely correct to say that with the current burden of debt, it is not an opportune moment for big tax cuts.
What took him so long?
Record breaker
Our politics is dysfunctional but at least we do not have the government shutdowns that are a feature of the US system.
The current one, caused by a stand-off over healthcare costs, is entering critical territory.
Government employees are being fired, poor Americans are at risk of going without help to buy food, air travel is being disrupted ahead of Thanksgiving and the Federal Reserve is having to make key economic decisions without the benefit of labour market data.
The shutdown began at the start of October, and if it is still going this evening, it will be the longest ever, surpassing the 35-day closure under the previous Trump administration.
Not the sort of record you’d want to break.
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