It’s a miracle Reeves delivered her growth speech with a straight face

As consumer confidence stalls, Labour is tearing our fragile public finances apart

Daily Telegraph 

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Rachel Reeves last week claimed she is “fixing the foundations of the economy… creating the conditions for growth and investment”.

Yet in last October’s Budget, with the tax burden already at a 70-year high, the Chancellor raised taxes by another £40bn per year – equivalent to putting 5p on the UK’s 20p-in-the-pound basic rate of income tax.

Much of this huge tax increase actually falls on business, given Reeves’s £25bn rise in employer National Insurance contributions. Union-friendly regulation in Labour’s Employment Rights Bill will cost companies another £5bn per annum, with firms shelling out for an inflation-busting rise in the minimum wage too.

Just the prospect of these measures ­– the tax rises and minimum wage increase start in April – has seen firms rapidly shed workers, with employment now falling at its fastest rate since the 2008 financial crisis. Since the Budget, consumer and business sentiment have plunged, pushing Britain to the brink of recession.

The UK economy surely contracted during the final quarter of last year – the December figures are published in less than a fortnight. Far from “creating the conditions for growth”, Reeves’s policies are thwarting economic expansion with more ideologically driven statism no doubt to come.

Off-the-shelf rhetoric about a new Heathrow runway and less planning regulation won’t help as it won’t impact the real world economy for years or even decades. And as consumer and business spending stalls, Labour cranks up state spending, tearing our fragile public finances apart.

The Government borrowed £17.8bn in December, more than double the fiscal deficit the same month in 2023. The 10-year gilt yield ended last week above 4.5pc – up a full percentage point over four months and way higher than during the October 2022 mini-Budget crisis.

No less than £8.3bn of December’s borrowing went on interest on existing government debt. The UK’s national accounts are now moving into Ponzi scheme territory, with traders eyeing a full-on bond market meltdown. Yet still Reeves told an audience at Siemens in Oxfordshire, with a straight face, that she is “fixing the foundations” and “promoting stability in our public finances”.

But the line that really jarred in her speech was this: “There is no trade-off between economic growth and net zero.” This is arrant nonsense. The costs of implementing the Climate Change Act run into hundreds and hundreds of billions between now and 2050. And, before then, ever-rising levies on energy bills will impoverish thousands of businesses and millions of households, while destroying countless jobs.

Scotland’s last remaining oil refinery – Grangemouth – recently closed with the loss of 400 jobs directly. The last two blast furnaces at Port Talbot just shut, triggering 2,500 more lay-offs. Vauxhall’s Luton plant was axed in December, involving 1,100 more redundancies. All these closures were driven by overzealous net zero policies. All involved thousands more job losses up and down local and national supply chains.

These are just the latest examples of the countless factories providing decent, well-paid jobs and driving growth, in parts of the country where such jobs and growth are scarce, shut down due to the indulgent net zero fantasies of successive governments.

Then there’s the Tories’ windfall tax on UK oil and gas production, a levy Labour has raised even more, while introducing a total ban on new energy extraction from the North Sea. Around half a million jobs depend on our oil and gas industry – fuels accounting for around 70pc of the UK’s energy needs, which will remain vital even if our ridiculously ambitious 2050 net zero targets are met.

So why not use our own oil and gas, keeping the jobs and related tax revenues within Britain instead of relying on far more expensive imports shipped from around the world on diesel-belching tankers, emitting far more carbon than UK-sourced energy?

Plus, renewable subsidies added to energy bills mean our firms and households are paying the highest electricity prices in Europe – with such levies set to escalate over the next few years, pushing bills up even more.

I’ve spent years arguing for a gradual shift away from fossil fuels. But that transition is happening at a pace that – economically, technologically and politically – is entirely unrealistic.

Take the incoming ban on new petrol and diesel car sales from 2035 – the zero-emission-vehicle (ZEV) mandate. Labour has pledged to bring that forward to 2030. UK car sales fell 14pc last year, amidst much slower than forecast demand for electric vehicles (EVs). Their market share remains stuck at well below 20pc and is heavily reliant on fleet sales subsidised by tax breaks.

The ZEV mandate is now destroying the UK car industry. Last year, carmakers risked huge fines because EV sales didn’t account for 22pc of cars sold in Britain.

While allowances built into the system mean the Government insists no car maker was actually fined, they were threatened with an insane £15,000 penalty for every vehicle by which they fall short of their electric targets. This year the threshold is 28pc, ratcheting up to 80pc by 2030, even though the complete ban is 2035. The speed of transition and fining regime is far tougher than across the European Union.

Tim Tozer, who spent years at the top of car manufacturing in Britain and globally, was formerly the managing director of Vauxhall. He tells me: “Successive governments have over-focused on EVs, pushing far too hard when this technology is anyway likely eventually to be overtaken by hydrogen.

“Whitehall is never the best judge of what technology will prevail, business customers have been subsidised excessively and the retail demand for EVs just isn’t there.”

“The Chinese influx is on its way and could very seriously undercut and undermine car manufacturing in Britain,” Tozer adds, recalling that massively subsidised EVs made in China already account for 60pc of global production. “The floodgates would be open for Chinese vehicles to absolutely dominate our market”.

But don’t worry. “There is no trade-off between economic growth and net zero.” Rachel Reeves said it, so it must be true.