How is Reeves really going to balance Labour's books?

One promise that the chancellor, Rachel Reeves, has kept is that there would be no tax changes in her spring statement, with all the action centred on those cuts in public services.

- SEAN O'GRADY

She said last year that she wanted to have only one major “fiscal event” per annum, ie the autumn Budget, and that any updates on the economy to accompany the Office for Budget Responsibility’s economic and fiscal outlook publications in the spring would be minor affairs.

Of course, the welfare reforms made it a bigger deal, but that was about it. Promise kept. However, the spring statement has posed as many questions about future plans as it has answered...

Why didn’t Reeves put taxes up rather than cut spending?

One is a degree of stubbornness, or pride, and a determination on the chancellor’s part not to give the Conservatives and her media critics an easy win when they taunted her about having to implement “an emergency Budget”, or “mini-Budget” (recalling grim memories of Liz Truss). That would look weak and chaotic, and she wasn’t having that.

The second reason is that taxes, at least as a proportion of national income, are running at a post-war high, and pushing them up again would be deeply unpopular. Reeves has let it be known that she won’t repeat last October’s bold tax-raising measures, at least on that sort of scale. She is also constrained by the manifesto pledges on rates of income tax, VAT and (employee) national insurance.

So why would she raise taxes again?

Only because she might have to, and that can’t be ruled out. In the October Budget and again in the spring statement, she has left herself very little in the way of a buffer if things go wrong, such as a global trade war that would hurt British exports and wipe out economic growth and expected increases in tax revenues. The £9.9bn of “headroom” on a public sector that’s spending £1,200bn a year is clearly risky. That’s why the experts think she’ll move on taxation again in the autumn, albeit maybe not as drastically as last year.