UK Budget 2025: Labour's economic policies are unravelling much like COP30's hopes of ending oil and gas
After the COP30 climate summit ends with a whimper, Chancellor Rachel Reeves’ second Budget may not fare much better
Are we in this same autumn month witnessing the simultaneous demise of two beliefs that are central to global collectivism? Is the theory that governments can tax, borrow and spend their way to prosperity about to come crashing down at the very same moment the evidence that government efforts to impose massive reductions in carbon energy use are looking increasingly futile?
Last week the annual global collectivist jamboree that is the UN’s Conference of the Parties on Climate Change, COP30, ended not so much with a bang as a whimper. Tomorrow we shall have the second Budget statement of Rachel Reeves that is likely to determine the fate of the Labour government.
It offers the promise of being a day of reckoning that will lead inevitably to the replacement of the Chancellor and eventually her boss, Prime Minister Keir Starmer.
The military aphorism that “no plan of battle survives first contact with the enemy” is credited to the Prussian Field Marshal, Helmuth von Moltke the Elder, while boxer Mike Tyson put it more brutally “everyone has a plan until they get punched in the face”.
Bad COP
As it came to an end, the final communique of COP30 in Brazil simply confirmed the hollowness of purpose and worthless commitments of such hypocritically costly and environmentally damaging gatherings. The volumes of collective virtue-signalling that once delivered the Kyoto and Paris agreements have quickly turned into a heap of ash awaiting the dustbin of history.
The Amazonian location of Belém required hundreds of thousands of trees and acres of rainforest to be cleared to build a four-lane, eight-mile highway so the 60,000 participants could reach the concrete venue from the airport. The vast majority used private jets or at least two flights to get there.
Starmer suffered an extravagant rebuff, changing his schedule to fly to Brazil in the hope of seeing the EU’s Ursula von der Leyen – but she was too busy. The UK’s jet-fuel guzzling Net Zero Secretary Ed Miliband stung the taxpayer for at least four flights there and back – going to Brazil twice in a fortnight! Meanwhile the leaders of China, India, Russia and the US did not even bother to turn up.
Just before the conference opened, the Brazilian competition authority ruled the Amazonian soy moratorium – designed to protect against deforestation resulting from low-yield soybean farming – was illegal. Forest clearance for environmentally damaging soybean cultivation is now expected to ramp up significantly.
While a COP30 draft communique had mentions of a roadmap away from fossil fuels, all were expunged by the end. Likewise oil and gas-producing countries refused to engage in discussion – and, according to the BBC, the EU was given “short shrift”. Anything that was agreed will have no legal standing – resulting in a dawning recognition of the madness of tens of thousands of people flying to a conference for a fortnight, but achieving very little.
Endless Budget speculation
The UK Budget is likely to fare no better for the Labour government than the COP 30 debacle. In her first Budget, Reeves waited too long between the July general election victory and her pre-Halloween announcement of a huge jump in tax (increased by £41 billion) and borrowing (up £30bn). This meant endless speculation and encouraged pessimism that proved justified – especially with pensioners’ heating allowance cuts and later the proposed benefit cuts.
She didn’t learn and this year set an even later Budget date at the end of November – again allowing endless speculation that Starmer’s Labour government has itself stoked. There have been endless official briefings talking up the problems of another black hole, the floating of new taxes to fill it, and a truly bizarre statement that suggested an income tax rise which has since been denied.
Meanwhile the deficit and national debt are both climbing as public borrowing exceeds expectations month-on-month. Labour’s increases in employers’ national insurance contributions are seeing unemployment increasing, while vacancies are shrinking as business slows down. More unemployed mean fewer people paying tax but more receiving benefits. That means higher taxes estimated at between £20bn-£30bn for starters.
But here’s the kicker. To keep Labour backbenchers on side – so Starmer might remain leader – big promises are being made that there will be new or higher welfare benefits. There is talk of removing the two-child cap that will make social benefits unlimited (costing £3-3.6bn annually) and also talk of compensation for Waspi women who had their age of receiving state pension moved (costing £10.5bn). These are very big ticket costs when the government has no money.
Additionally, with the uprating of benefits above inflation, the total cost to HM Treasury is estimated at an extra £15bn a year. But there will be no uprating of the tax thresholds for inflation – they will likely remain frozen or even be extended into later years. Why are benefits uprated for inflation but tax thresholds for those who pay for those benefits held down?
There is no money. The country is living beyond its means. It has not had a surplus since the financial year 2000/01. Additional spending means higher taxes and higher borrowing (which is tax paid for by our children and grandchildren).
Labour is testing the model of tax, borrow and spend to destruction. We are marching into a doom loop where tax increases are reducing revenues and killing growth – meaning more borrowing that requires higher taxes the following year.
Be it the idea to end all use of oil and gas that is seeing industries closing all around the UK or the idea there is an unlimited pool of other people’s money to spend to harvest votes, the plans are not surviving the contact with reality. A change is coming.
Brian Monteith is a former member of the Scottish and European parliaments and senior adviser to the tax Reform Council
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