Was it the wisest decision for Rishi Sunak to announce the partial-scrapping of High Speed 2 in Manchester, at Conservative Party Conference last year? Probably not. But it was the right call – made too late – and a gift to Labour, given the doomed project is already running tens of billions of pounds over budget and is heavily delayed.
It really is a remarkable opportunity not to repeat Tory mistakes. Whatever Sir Keir Starmer announces in the way of building projects is likely to take the better part of a decade – but if the party starts now, it could be online by the time a really competitive election comes around.
A focus on local transport and energy infrastructure could produce what the Tories failed to deliver: lots of examples of building something new. A pivot back to grandiose projects is not just a waste of money, but a waste of time, too.
Another big ticket item will be lifting the two-child benefit cap. Given pressures within the party, it’s possible the Chancellor will buckle sooner rather than later.
Scrapping it entirely would cost roughly £3.6bn, a figure dwarfed by public sector pay hikes, but where is the cash coming from? The tax plans announced by Labour before the election were all relatively small revenue raisers: a higher windfall tax, changes to non-domiciled tax status and VAT on school fees are expected to raise relatively modest amounts – and that’s the best-case scenario.
A research paper published last year by the education think tank EDSK estimated that the VAT charge risked enough change in parent’s schooling decisions that it was most likely the tax would raise a lot less than estimated – and it was possible it would raise very little at all.
Similar questions are now being asked of the tax hikes Labour didn’t comment on before the election, including speculation that Reeves will bring capital gains in line with income tax this October.
The Telegraph has this week reported that the latest estimates from HMRC warn behaviour could change so substantially that a 10 percentage point increase to CGT could risk losing the Treasury £2bn by 2027-28.
This is a strange position for the Government to be in: warnings from departments and independent bodies that it is at risk of losing revenue, when all the economic indicators imply that Reeves is likely to have more cash on hand to spend than her predecessor thought he would have, as the UK growth rates have taken a turn for the better.
This week the Treasury released its latest roundup of short-term forecasts for growth: 1.1pc. We’re not exactly going gangbusters, but it’s a significant revision from the 0.4pc the Bank of England was predicting in May this year (and has now revised upwards to 1.5pc).
