The prime minister is right to prepare us for a Budget of harsh realities

Editorial: In his gloomy assessment ahead of Labour’s first Autumn Statement, Keir Starmer has at least levelled with the British people – cakeism is over, and we can no longer aspire to European-style public services with US levels of personal taxation

Sir Keir Starmer’s unexpected announcement of a hike in the cap on bus fares, from £2 to £3, is an indication of quite how difficult the Budget will be (PA)

It is now fair to say that, two years after Boris Johnson was so ignominiously forced to relinquish the premiership, the golden age of cakeism and mindless boosterism is finally over.

The era enjoyed a late and inglorious spasm during the brief interval when Liz Truss indulged herself in those spectacular unfunded tax cuts. It then spluttered on for a little while Rishi Sunak and Jeremy Hunt cut national insurance contributions on the basis of completely unrealistic plans for public spending.

Now, appropriately close to Halloween, Sir Keir Starmer has driven a stake through the heart of this favourite national delusion. Put simply, the British people are no longer to be soothed with bromides that they can enjoy European-style public services but get away with American levels of personal taxation.

As Sir Keir says: “It’s time to choose a clear path and embrace the harsh light of fiscal reality so we can come together behind a credible, long-term plan. It’s time we ran towards the tough decisions because ignoring them set us on the path of decline. It’s time we ignored the populist chorus of easy answers … we’re never going back to that.”

In truth, the ballooning of the national debt during the pandemic and the energy crisis killed cakeism pretty much for good because borrowing our way out of trouble is more or less closed off. All Sir Keir is asking the electorate to examine is its lifeless body. He is right to do so, and he may as well “embrace” the inevitable tasks that he and the chancellor, Rachel Reeves, are to set about. He should, though, be careful not to overdo the negatives, and show there is purpose attached to their prudence.

An early token of intent, and an intriguing one, was Sir Keir’s unexpected announcement of the hike in the cap on bus fares, from £2 to £3 for 2025. It’s hardly welcome, but it could have been much worse, particularly for those in rural areas.

Tough as the Budget will undoubtedly be, it could turn out that the very harshest glare of the “harsh light of fiscal reality” may end up being avoided, at least for the time being. Thus, the rise in employers’ national insurance contributions could be restricted to pension contributions; and second homes or residential property exempted from the hikes in capital gains tax.

Even so, it was never going to be possible to raise £40bn a year in taxes and cuts in the impractical public spending plans left behind by the Conservatives without the great majority of the population being made worse off. Even if the letter of the Labour manifesto pledge not to raise income tax, VAT, and national insurance rates, what Sir Keir persists in calling “working people” – and former “working people”, in the shape of those relying on the state retirement pension – will suffer financial loss. The long freeze in tax thresholds will take thousands of pounds away from millions of middle-earning families – a pernicious stealth tax for the rest of the decade.

Taxpayers will not be particularly appeased by any lawyerly pleas about the carefully and ambiguously drawn phrasing in the manifesto about “working people”. If they are now to be asked to embrace this “harsh light of fiscal reality”, why were they not warned of this before?

Why was Ms Reeves’s “fiscal plan” so at odds with where we find ourselves now? Why did Labour, seemingly, accept the Tory spending plans all the experts said were pure make-believe?

It may well be that the Tories ran away from the pay review recommendations for the doctors and train drivers – but why did Labour not factor them into their own plans? A shrewd guess could have alerted everyone to the imminent fiscal crisis.

Why, by that same logic, did Labour fail to publish in its pre-election fiscal plan the cost of settling the infected blood and Post Office scandals? They were hardly state secrets.

The truth seems to be that if Labour had told the voters before the election that voting Labour would mean them being hurtled at warp speed towards this “harsh light of fiscal reality”, they might well have opted for the warm cakeism offered to them by Mr Sunak. If the withdrawal of the pensioners’ winter fuel allowance had been in Labour’s manifesto, it would have been a bit of a vote loser in the marginals, for a start.

Unforeseen or not, though, the fiscal truths certainly have to be faced up to now, and the voters are keen to learn what they may expect in return. This, rather than higher taxes and cuts to public services, is what they thought Labour meant by the slogan “Change”. They will soon find out.

Cakeism aside, it is not too much for the voters to be reassured that their futures, and in particular their mortgage bills, will be protected by Ms Reeves’s prudence. They should also be told how and when they may look forward to being able to book a reasonably prompt appointment with a GP. The same goes for their waits for an ambulance, higher standards in state schools, public transport, water quality, social care, the defence of the realm, and much else.

It is almost a contractual conversation: more tax – but what do we get in return?

When – if – those improvements in public services materialise, then Labour will be winning the argument and winning back disillusioned votes. It will then be the Tories’ turn to answer awkward questions about future cuts to services, just as it was when Tony Blair won his second and third terms in office in New Labour’s decade of dominance, the 2000s.

The public, however reluctantly, are accepting that they cannot have their cake and eat it, and there are no easy answers to the UK’s economic problems – and certainly, no reversal of Brexit is within sight. Yet Ms Reeves and Sir Keir must be careful to tell people that not only can they not eat their cake, they cannot have it either.

“No cake at all” is a shock that Labour has not prepared us for.