Labour must find hope in a tough Budget to show it will make Britain work better

In as class-obsessed a nation as Britain, a national debate about what constitutes “working people” was always going to descend into fractious absurdity – and, as with the forthcoming Budget, so it has proved.

Labour’s vague manifesto promise not to raise taxes on “working people” proved highly useful before polling day – but it has become a terrible burden since. Now the party needs to move the arguments on, and the prime minister is certainly trying to do so. In an important speech, he will talk about the trade-offs and choices made to protect “working people”. Such candour is overdue. Not in the sense that he has tried to deny that the Budget will be tough – he has already said things can only get worse – rather, the task is to draw the wider picture. In Gordon Brown’s time as chancellor, it was “prudence with a purpose”.

Now, Sir Keir Starmer and his chancellor must explain why one of the toughest budgets since the Second World War is not just unavoidable but will actually be worth it.

Yet, thus far, instead of setting out the “vision” of Britain after five or 10 years of his administration, and how to get there, the prime minister and his colleagues are being bombarded by queries about who “working people” are. They’re asked whether, say, a self-employed painter and decorator earning £28,000 a year is less of a working person than a television presenter on a quarter of a million; or a teacher who happens to have a second home; or a nurse with some tax-free savings in an investment trust ISA. Would a pensioner who worked in a factory all their life qualify as an honorary working person for those purposes?

Sources close to the chancellor, Rachel Reeves, issued a clarification that indicated those on six-figure salaries are “working people”. So, the public is left to draw the logical conclusion that the only people who’ll be paying more tax as a result of Wednesday’s announcements will be those with earnings, or income, of £1m a year or more.

Except, of course, that everyone knows that almost everyone will be worse off than they were before, and on Wednesday, inevitably, they will learn the grim reality. The basic outlines of the Budget have been well-trailed in advance. It’s clear that taxes on wealth and savings will be increased, which will affect savers, and even those with very modest amounts put away.

It’s also obvious that employers’ national insurance contributions will be levied on their payments into staff pension pots, which may well affect those workers’ future pay and benefits. If council tax, air passenger duty and fuel duty go up, then only the very poorest households will escape the pain. Above all, we know that tax thresholds will be frozen for even longer than Rishi Sunak and Jeremy Hunt had planned, with this stealth tax very definitely affecting working people and doing so for the rest of the decade.

Labour may claim that they didn’t say anything about thresholds in their manifesto or “fiscal plan”, but their constant mantra about “working people” being protected has given the impression for many months that those who consider themselves working people wouldn’t be paying more tax under Labour – but they will. Even under the Tories’ plans, between 2022 and 2029 the threshold freezes mean that nearly 4 million additional individuals will be expected to pay income tax, 3 million more will have moved to the higher rate, and 400,000 more onto the additional rate.

And yet the dissonance in Labour’s messaging persists. Not so very long ago, for example, Ms Reeves condemned the Tories’ plans as “picking the pockets of working people”. The education secretary, Bridget Phillipson, with impeccable working-class credentials, says that taxes on working people are already “too high”, and that “when people look at their pay slips, they will not see higher taxes”. Yet in real terms, the freeze in thresholds is the most significant, if invisible, of Ms Reeves’s tax hikes. This particular semantic debate will subside when the tax schedules are published.

What is of paramount importance in this Budget is that Ms Reeves and her colleagues start to win the political arguments that have been neglected amid the speculation. She will have to explain why the public, and that very much includes working people, are being asked to pay more in tax and where the money is to be spent. She will need to demonstrate that, for example, the sacrifices in personal consumption will mean easier access to healthcare and better schools. People need to be persuaded that their taxes will indeed be wisely invested, and boost growth and prosperity in the longer run.

It’s early days, but the public is impatient with the lack of clarity during Labour’s early months in office. The King’s Speech and the Labour conference should have been masterclasses in political presentation, given Labour’s performance in opposition, yet they failed to get the “vision” across. All the policies, the bills and the rhetoric are individually fine but are beads without a string. The work of the Starmer administration lacks a unifying theme. It may even get worse if Ms Reeves’s Budget, with its welter of tax hikes, gets overwhelmed by rows with a wide array of interest groups about, say, fuel duty or taxation of inherited farmland, just as George Osborne found with his “omnishambles” Budget a decade ago.

Labour has not yet completed the transition from relying on the deliberately vague and ambiguous language of opposition to proving their case for being in power with actions and at least the realistic prospect of making “working people” better off. We will know on Wednesday “what” they are doing, but less about the “why”, nor the “when” of the expected results.

Having spent too much time blaming the Tories (albeit with substantial justification) for the state of the public finances, and playing word games about “working people”, Labour cannot afford to let pass this supreme opportunity to make their case, set out their plan and win the economic argument.