Will school fees and farmers prove a roadblock to Labour’s Budget plans?

As the new chancellor comes before the Treasury committee for the first time to defend her economic policies, Sean O’Grady asks if the government has got off to a flying start or is digging itself into a rather muddy hole

The mantra, repeated by the prime minister at PMQs, is that the first Labour Budget in 14 years is “fixing the foundations”. That means the short-term pain of higher taxes is justified by the need to put the public finances on a more sustainable basis – because without that there can be no business confidence, investment or growth.

Impeccable logic, but many of the measures in the Budget have stirred controversy and attracted considerable resistance – notably the imposition of VAT on private school fees and the reduction in tax relief for inherited farms. “Working people” were plainly affected by the changes to employers’ national insurance contributions, and the earlier cuts to pensioners’ winter fuel payments are still resented. So how is the Budget going?

What’s the latest?

The chair of the Office for Budget Responsibility (OBR) has given Rachel Reeves a useful boost by attacking her predecessors. Richard Hughes told the Treasury select committee that in March, the OBR asked the Treasury – at the time overseen by Jeremy Hunt – what information had been held by civil servants and ministers when the independent watchdog was compiling its March predictions. This request uncovered “£9.5bn of net [spending] pressure which they did not declare to us, which under the law, and under the act, they should have”.

Had the Conservative government been open about this figure, the Treasury would have been revealed to be at risk of breaking its target to bring down debt over the next five years.

When this was raised at the select committee hearing by the chair, Dame Meg Hillier, there ensued an orderly but wary and inconclusive argument between Hillier and several others present: John Glen, the former (Tory) chief secretary to the Treasury (but also now on the select committee); Reeves, as another aggrieved party; and the highly defensive Treasury permanent secretary, James Bowler. Bowler gave a dissertation on wrongful assumptions, difficult timing, and sub-optimal “bottom-up” spending plans, but his own upturned backside was still given a vigorous spanking by the distinctly unimpressed Hillier.

On the whole, Reeves seemed to enjoy her first Treasury committee session. That may not last.

Will Jeremy Hunt be prosecuted?

He angrily denies the accusations, and it feels unlikely, all things considered. It’s not a great precedent for any serving politician to want to set, so Reeves will let it slide for obvious reasons. But she will always be able to quote the OBR when she’s blaming the Tories “for the mess”, and it helps justify her plan to strengthen the fiscal watchdog.

So, is the £22bn ‘black hole’ Reeves has described real?

Partly, at least. According to the OBR, the funding gap the Tories failed to declare amounted to £9.5bn. She adds to that another £9bn or so for two big public-sector pay settlements she says she was bound to grant, for the doctors and the train drivers. Reeves also chucks in the monies needed to settle claims for the Post Office Horizon scandal and the infected blood scandal. These had been agreed in principle, but not quantified, by the Sunak administration.

Will the government back down on school fees and the so-called tractor tax?

There’s no sign of that at the moment, and, with a parliamentary majority of about 150 seats, Labour will have no problem getting the legislation onto the statute book. There’s a legal challenge by parents to the private schools move, answered by a broader counter-action from the Treasury directed at private schools that attempted to avoid the new VAT rules (due to take effect in January) by allowing the advance payment of fees. It’s doubtful that the courts will block the extension of VAT passed by parliament.

The farmers pose a more difficult challenge. Protests are scheduled for 19 November, and the National Farmers’ Union, a special interest group, are good at this sort of thing. Inevitably there will be tractor convoys blocking the roads and generally causing disruption, with Jeremy “love him or hate him” Clarkson at the head of the campaign.

The worst-case scenario for the government would be something like a repeat of the fuel protests in 2000, when the lorry drivers blockaded fuel depots and almost brought the country to a halt. Kemi Badenoch, on her first outing as leader of the opposition, raised the issue. Keir Starmer replied that the great majority of farmers would be unaffected.

Win or lose, it’s bound to be a troublesome distraction for the government – and a politically useful way for the Conservatives (and Liberal Democrats) to present themselves as defenders of country folk. No doubt those Labour MPs now representing rural seats for their party for the first time will be making their concerns clear to the government whips.

Will the farmers win?

They’ll have sections of the press behind them, as well as MPs and some public sympathy. It really depends on whether Starmer and Reeves have the stomach for a fight they may not win, and a “winter of discontent” when they’re falling behind in the polls. They may see it as their version of the miners’ strikes Mrs Thatcher won, or the riots in the summer; or it may be that they quietly cave in before they’re forced to do so, as Tony Blair and Gordon Brown were indeed obliged to do when the fuel refineries and depots were blocked at the turn of the century.