Rachel Reeves has consigned Britain to a doom loop
'The economy was weak across April and May,' the ONS said, blaming consumers and businesses racing to beat tariffs and stamp duty by bringing activity forward. There was, however, a stronger recovery in June, with the economy expanding by 0.4 per cent.
Between April and June as a whole, services drove most of the growth, with particular strength in computer programming, healthcare and vehicle leasing. Construction also expanded, while production contracted. On a per capita basis, growth was a meagre 0.2 per cent.
While these figures are weak enough to be troubling for the Chancellor, Reeves will take some comfort from June's stronger-than-expected performance. They cast doubt on last week's claim by the National Institute of Economic and Social Research (NIESR) of a £50 billion fiscal black hole she must fill this Autumn. Even so, there will still be a hole – likely in the tens of billions – that, unless she is willing to shrink the bloated state, will make tax rises inevitable.
The figures confirm that the G7-leading growth we saw in the first quarter was 'something of a mirage,' as Lindsay James, investment strategist at Quilter, put it. We have now slipped back to the 'anaemic growth' Britain is accustomed to. Worse still, the dismal jobs data released on Tuesday suggest even this sluggish 0.3 per cent pace will be hard to sustain in the second half of the year.
If the fiscal crisis forces the Chancellor into hefty tax rises, the chances of reigniting growth will recede further. Higher taxes will weigh on business investment and household spending alike, deepening the stagnation. Without a credible plan to spur productivity, the risk is the cycle of crisis just spins faster: weak growth begets higher taxes, which in turn choke us. The doom loop grinds on.
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Times
5 hours ago
- Times
Times letters: How inheritance tax changes affect growth
Write to letters@ Sir, You argue in your leading article 'From Me to You' (Aug 14) that it is 'morally wrong' to levy inheritance tax on 'those who have worked hard throughout their lives to earn something to pass onto the next generation', but the biggest slice of inherited wealth is in the form of a house sale. The amount of income used to acquire a house depends mainly on the size of the mortgage at the time the house was bought — that is, its historic value — not on what it is sold for as part of probate, its current value. An adjustment for inflation may be appropriate, but there is no reason a house should be tax-exempt because its deceased owner 'worked hard to acquire it'.Peter Curwen Leeds Sir, For Rachel Reeves, wealth is a sin and she intends to tax it like other sinful behaviours. Sin taxes have a long history in reducing activities that politicians disapprove of. Sin taxes on smoking, drinking and driving have succeeded. Inevitably, as our sinning diminishes, so do sin tax revenues. Tobacco and fuel duty revenues are both down. Alcohol duty revenue is up, marginally, but on lower per capita consumption because tax rates on stronger booze have increased. Sin taxes on wealth will have the same result. There will be far less of the sinful activity of wealth creation, and eventually tax revenues will fall. The worst sinners are already fleeing our shores. Inheritance tax revenue will disappear as people stop leaving wealth to their children. As you have reported (Jul 28), capital gains tax revenues are already falling, from £14.6 billion in 2022-23 to £12.1 billion in 2023-34 as the sinners prepare to repent. What's more, with far fewer of the '1 per cent club' who pay 30 per cent of total income tax, we can all look forward to even higher tax bills ReeceLondon N4 Sir, I wonder if Rachel Reeves has fully considered the implications of subjecting pensions to inheritance tax. 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The Independent
18 hours ago
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