Owen Polley: Chancellor Rachel Reeves splashed the cash but the odds are it won't end well

For this reason, some of the messages that underpinned Labour’s budget were just as worrying as its content. There seemed to be an implication that, under the Conservatives, taxes remained low and public services were starved of funding.

In a speech that prepared people for the Budget, the prime minister claimed that the Tories encouraged “the fiction” that “you can always have lower taxes and that your public services will run properly”. That impression of Conservative rule was not supported by the figures.

In the previous Budget, delivered by Jeremy Hunt, the UK’s tax burden formed a higher percentage of national income than at any time since the Second World War. This reflected the fact that borrowing was also at its highest level for 60 years, thanks mainly to the government’s policies during the Covid pandemic.

On Wednesday, the chancellor announced a record £40 billion of tax rises. Some of the most eye-catching decisions included raising employers’ national insurance (sometimes referred to as a ‘jobs tax’), a hike in inheritance tax (including family farms) and higher ‘stealth taxes’, like Air Passenger Duty (meaning greater costs for all of us).

There was an argument that Labour needed to restrain spending, or even maintain a high level of taxation, to get debt down, but that was not the main thrust of Reeves’ and Starmer’s first budget. Instead, they chose consciously to shift money from the private sector, including small businesses, to the public sector.

The chancellor made some attempt to cast this decision as an investment that could save cash over the longer term. For example, she said it would allow hospitals to introduce technology and digital innovations that “unlock significant savings for the NHS”. But she also implied that further tax rises would be needed in upcoming Budgets, to sustain these services.

That raised the prospect, under this government, of the tax burden increasing steadily, in a doomed attempt to chase the demands of an ever larger NHS.

The government’s own report into the health service, by Lord Darzi, acknowledged that money alone could not fix its problems. The facts are that our population is getting progressively older and experiencing more complicated illnesses. Without radical changes to the NHS model, it is unlikely that enough cash can ever be injected to keep up with its demands.

In Northern Ireland, across the public sector, we’re already decades behind the inadequate reforms that have occurred elsewhere. Although the government said that our share of extra spending amounts to £1.5 billion, some local politicians claimed this was not enough, citing the dubious argument that we have been historically ‘underfunded’.

The problem is similar to the NHS. No matter how much money the government stumps up for Northern Ireland, it will never satisfy our politicians, or exhaust the culture of entitlement that they represent.

The Office for Budget Responsibility (OBR) is the public watchdog that analyses the UK’s finances and forecasts how they will affect the economy. It says that, as a result of the chancellor’s decisions last Wednesday, the state will soon represent 44% of this country’s economic activity. That’s 5% higher than before the Covid pandemic.

In Northern Ireland, the public sector is already disproportionately large, so it is tempting to assume that more government money will benefit our economy. That may even be the case in the very short term, but over a longer period, this approach makes us poorer, as decades of over-reliance on the state have shown.

Rachel Reeves hoped that OBR figures would help justify her budget, but in response to her decisions, the organisation quickly cut its growth forecasts. While the government argued that it was protecting workers by freezing direct taxes like income tax and VAT, the watchdog predicted that raising taxes on businesses would lead to lower wages and higher interest rates.

The chancellor’s plan was to argue any ‘pain’ in this Budget was necessary to get Britain’s debt under control. The irony is that, according to the OBR, she plans to finance roughly half of her splurge by borrowing more money. And the cost of that borrowing increased last week, as markets reacted negatively to the Budget.

This is a Labour government and, in a sense, it should be no surprise that it has decided to raise taxes, spend more and increase debt. That is the essence of left-wing economics, even if, historically, it has usually had disastrous results.

This time, though, Starmer and Reeves did their best to disguise the reality, by claiming to prioritise economic growth and using language that suggested a return to Tory ‘austerity’. Instead, this Budget looked a lot like going back to old school socialism, punishing businesses, running up debt and encouraging a bloated, inefficient public sector.