The Great Budget Betrayal: Ex-Chancellors Unpack Labour’s £70B Tax Grab and “Madness” Manifesto

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1:21Kwasi Kwarteng:This is an emergency post-budget exclusive broadcast with two ex-chancellors of the UK, Jeremy Hunt and Kwasi Kwarteng. In their only media interviews exclusively for disruptors, following the budget, we unpack Labour's policy U-turns and the controversy surrounding the reported OBR pre-budget leak. I think some of them are intentional and some of them are accidental. That to me is serious. Nothing is held back and these truths are brutal. Growth was completely sacrificed. If you tax people enough, they will leave. Do you think Rachel Reeves is qualified to be the UK Chancellor? In all candour.

1:58Kwasi Kwarteng:But first, let me know in the comments what you think about Labour's budget plans. And now, here are not one, but two ex-UK Chancellor's unfiltered thoughts. Jeremy, what shocked you the most about the budget? I think that I felt a bit betrayed, actually, because obviously I'm a conservative and, you know, I've got skin in the game as a former chancellor. But I was really giving Rachel Reeves and Keir Starmer the benefit of the doubt on an individual level. I think they're both decent people and, you know, different political traditions. But I really did think that we would have a party that, yes, they were never going to agree with me on the need to bring taxes down.

2:43Kwasi Kwarteng:But I thought the basic philosophy was going to be pro-business. And I think yesterday, very sadly, you know, growth was completely sacrificed to the internal Labour Party debate about welfare spend. And I think it's going to make it much harder to get out of our low growth trap. So I was pretty disappointed, actually. What made you think that Labour would be pro-business? um look by the way i'm going to try and say some cheerful things uh you know it's uh i don't want this to be like uh you know a morgue um after the after the budget but you know i absolutely believed rachel reeves when she told everyone that she wasn't going to put taxes up on working people and that you know she said countless times that you can't run the economy just by asking people to pay more tax.

3:39Kwasi Kwarteng:It has to come from growth. And so I was looking for some, you know, big efforts to unlock growth. And, you know, here's my first positive thing. You know, the fundamentals for the UK economy are fantastic. I mean, we talked about this last time, but my kids are 11, 13 and 15. If I was going to choose a big European country for them to be born in, I would definitely choose the UK. You can find smaller European countries that really got their act together like Switzerland or Denmark. And economists say that there is sometimes special factors which make it easier for countries of, you know, three to five million population to do really well.

4:24Kwasi Kwarteng:But if you're looking at the big countries, I mean, what we've got are the things that ought to really make us successful. I mean, we've got outside the US, the most respected universities in the world, three of the world's top 10. We've got the third largest tech sector in the world after the United States and China. And this is the century of AI. And so what you've got as well is, you know, all our universities now, starting with Oxford, Cambridge and Imperial, this sort of triangle, but actually spreading well beyond those. They've all got these amazing campuses with business parks, science parks, tech parks, spin outs galore.

5:03So there's some

5:04Kwasi Kwarteng:brilliant things happening here. I heard recently, I wasn't able to verify it, but someone said to me that if you look at the top 100 quantum companies in the world, three quarters of them are in the UK. So if that's true, that is really, really impressive. So the fundamentals are great. It's just we do need to deal with some of the structural problems that have been holding us back. Do you think Labour are starting to break down those fundamentals? I'm worried that we're going to have a period of prolonged stagnation. And, you know, I've been in politics for long enough to know that when you're under pressure, when you get into the bunker in politics, you start giving up on the idea of winning over new hearts and minds and just playing to your base.

5:53Kwasi Kwarteng:You start thinking, if only I can get the people who voted Labour last time to vote Labour next time, then we might get through the next election. and I'm not going to bother to win the argument with everyone else because they're obviously going to vote against us. You know, that was part of our mentality in the final part of the Conservative administration. We've kind of given up thinking we'd be persuaded floating voters and we just wanted to make sure that our core voters came home. And I feel Labour's already got into that position. I mean, you know, this£3 billion for getting rid of the two-child cap.

6:30Kwasi Kwarteng:I mean, we can talk about the rights and wrongs of it, but it's unpopular in the country. The country do not agree that we should say to people on benefits, you don't have to face the same trade-offs about how many children you have that everyone else has to face. And the country don't agree with lifting that cap. But obviously Labour MPs, the Labour Party faithful do. And sure enough, you know, they were thrown a bone. Kwasi, what shocked you the most about the budget?

6:57Jeremy Hunt:Very good question. I mean, I think that the relentless tax rises, but the tax rises were all, I think there were 43 separate measures. Wow. Because what they've done is they committed not to raising income tax, VAT, or national insurance on employees. And they couldn't raise any of them because they would contradict the manifesto. And I think Reeves wanted to do that, hence the sort of press conference three weeks ago. But because they couldn't do that, they went through this sort of what I call an itsy-bitsy approach. But all those measures were raising tax and what was the worst one do you think so I think the the mansion tax will arguably be the most The most regressive well the most the most forbidding because if you look at the top rate 40 % was introduced I think in 88 In 90 to 91 and Ed Ball said this today on GMB which I was on only 2 % of people paid the 40 % rate And now, of course, it's something like 25, nearly 30%.

7:59Jeremy Hunt:So you can live in a world where, you know, 2 million sounds incredibly valuable house. But, you know, you know, as well as I do, in 15 years' time, you know, a two-bedroom flat in Neasden will be paying the mansion tax, or the equivalent thereof. And that's what I think is a big problem.

8:15Kwasi Kwarteng:Right. So just how socialist do you think Labour are?

8:18Jeremy Hunt:So this is a very interesting question. I think in her bones, Rachel Reeves is not a socialist. Well, she's a social Democrat. She's not a full left. But it's obvious to me that they're being pulled to the left because of the political dynamics. You know, I looked at the polls this morning. Reformer, what, 28 % roughly. Labour on about 19%. The Greens are on 17, 16, 17%. So you can see a world where the left is totally fractured. You've got left wing Labour MPs. You've got Zach Polanski, the hypnotist. so he calls himself well you know about that you've got you've got he's our next he's the real man you've got you've got you know various Islamist parties or leaning parties the left is totally fractured and in order to have a chance of winning or getting back into power I think they've made the decision that they've got to go left they've got to corral as much of that left wing right behind them actually to win office and I think that's the game they're playing so they're being pulled to the left even though some of their instincts aren't that left-leaning.

9:24Jeremy Hunt:I'll give you an example. Beginning of the year, they said they were not going to lift the cap on two children, the welfare cap. Rachel Reeves was very adamant about that. We can't afford it. And of course, yesterday, that's exactly what they did. And if you looked at the House of Commons when she announced that, that got the biggest cheer from Labour MPs. You know, they were waving the order paper. We do that much better, actually, the waving of the order. But anyway, they did a version of it. And I was surprised. I was surprised at how enthusiastically they received they welcome that

9:55Kwasi Kwarteng:Do you think we're paying too much welfare in the UK right now?

9:58Jeremy Hunt:Oh, definitely. I mean, it's clear to me that And that's one, you know, people talk about the mini budget. That was where we went wrong We should we should be cutting or not cutting spending. I mean for mathematicians who should be sorting the first order So the raise of expenditure the increase in expenditure should be should be much lower that increase than it is today. You're growing the economy at, what, 1%, 1.5 %? And the welfare bill is going up, what, 4 %? The maths doesn't work. Wow.

10:27Kwasi Kwarteng:So does it feel like in the UK, you're rewarded for not working and penalised for working?

10:34Jeremy Hunt:Yeah, basically. I mean, the problem with the situation we're in, and it's a Western problem, is that we've got welfare states that were created, you know, after the Second World War, 80 years ago. Totally different demographic, totally different dynamics. And we're funding that welfare state where we have a lot less money, a lot less growth. And frankly, there's a lot more immigration than there ever has been. So if you think you're earning less money, but you're creating a welfare state which you have to pay for, and you simply don't have the means to raise revenue through growth, to pay for the public services and the welfare.

11:11Kwasi Kwarteng:What one thing that Labour changed at the budget that you thought maybe that's the most destructive? The one that most worried me, I think it was most economically illiterate, was the extra bans of council tax on more expensive homes. Now, you know, this is not, by the way, a sort of traditional Tory wanting to protect his wealthy friends. I'm very happy with wealthier people paying more tax. I think overall, everyone is paying too much now. and we need to start bringing it down as I started to do. But you will remember, and I was not popular for this, but in the 2022 autumn statement, I reduced the threshold that you pay the 45p rate from 150 ,000 to 125 ,000.

12:01Kwasi Kwarteng:So a lot of people didn't like that. I'm just saying that because the principle that when times are tough, we should ask wealthier people to pay their fair share, I have no problem with. But this is madness because the one thing that could happen in the next year that would get the economy motoring is the property market starting to take off as interest rates come down. As we know, inflation has nearly doubled in the last year, and that's meant that interest rates have stayed higher than they would otherwise have been. But there is now the prospects that they would start to come down and people start to buy properties.

12:40Kwasi Kwarteng:but with this measure which is not going to take effect for another three years but it it is going to gum up the top end of the property market which will have an impact on the rest of the property market as well and it's only going to raise 400 million pounds which in treasury terms is absolutely nothing but it is going to be another signal that you know this country is not backing enterprise and successful people and and I just think it's a really big miscalculation so a few hours before the budget there was a leak was that an accident or was that not an accident um well god it's been very chaotic and um I think some of them are intentional and some of them are accidental.

13:32Kwasi Kwarteng:So the one that was done like an hour before the budget was someone in the Office for Budget Responsibility who put up the OBR's verdict on the budget before the budget itself. And I think that was an accident, but they're doing an inquiry. I don't think that was malicious, Who knows? And then there were lots of leaks from the government trying to soften us up. At one stage, they thought they were going to raise income tax, and they were trying to soften us up for that. Those were obviously deliberate. But then at this time, what was different is there were lots of unplanned leaks. So when they changed their mind and decided they weren't going to charge us to raise income tax, that got out there immediately.

14:19Kwasi Kwarteng:And it was very chaotic. and for some reason it's gone very badly wrong on this budget. And my only point is, you know, party politics aside, we must sort this out because there is something that is a bit different about the UK, which is that because the whole world speaks English and, you know, the BBC is on TV in Singapore and, you know, people in Tokyo and New York read the Financial Times and The Economist. When you have this kind of chaos, the whole world knows. Now you could have this chaos in the run-up to the German budget or the French budget and Probably no one outside France or Germany would ever really know about it, but they know about it when it happens to us And uh, and it's not good for our global reputation.

15:07Kwasi Kwarteng:And so Um, so I think we need to sort it out.

15:10Jeremy Hunt:I think it's a convenient thing to have happened Because if you remember the mini budget we kept it all to ourselves and then we we announced it I announced it and the markets puked because they didn't know what was happening yeah so ever ever since then the treasury has just leaked everything they've leaked everything i think i was but yeah they're reacting against me um and and and and and i think there is a you know they said oh the markets didn't move at all of course they didn't they they'd read they knew exactly what was going to be in it yeah and when the obr did it that that was like belt and braces okay we've leaked everything and now we're really going to leak everything and oops oh my god it's on the website.

15:52Jeremy Hunt:And what surprised me was, if that happens, the head of the OBR would be like, what the, you know, this is terrible, they'd be flustered. But he immediately said, Oh, no, it's a terrible mistake, we're going to get to the bottom of it. Do you what I mean? It was so, it was so sort of slick his, his apology. I thought, Hmm, that's interesting. And these are just my own thoughts. But I think that it was convenient for the government for it to come out in that way. That's what I think. Doesn't mean they did it deliberately, but it was not the worst thing as far as they were concerned. That's what I actually think.

16:27Kwasi Kwarteng:Do you think Rachel Reeves is qualified to be the UK Chancellor?

16:31Jeremy Hunt:Well, look, I mean, who's qualified? I think Rachel, so having been there, I actually feel sorry for her. And I said that people say, really? And I, you know, the idea that there's some magical Labour Chancellor waiting in the wings, they would do exactly what she's doing. They would do exactly what she's doing. So, So, you know, whether it's Rachel from accounts or whatever you want to call her, or Wes Streeting or Angela Raining or any of these people, the idea that they're going to do different things is completely for the birds. Whoever is in this Labour government doing that job would have done exactly what she's done.

17:04Kwasi Kwarteng:So she's not really pulling any strings?

17:06Jeremy Hunt:I don't, I mean, I don't think she, I think she's potentially a fall guy. But, you know, if you look to the news over the summer, It was all about how number 10 had appointed Minouche Shafiq, who ran Columbia University. She's in the economic team. They put Torsten Bell, who, I mean, he's the mansion tax guru. He used to run a think tank. They put him in the treasury. The Labour backbenchers are cracking the whip as well. They didn't do welfare, the welfare reforms. You've got the OBR. So the idea that this lady who's sitting in number 11 has full autonomy is for the birds. There's a whole bunch of other interests that are driving this thing.

17:49Jeremy Hunt:So is she qualified? She lied about her CV, which I think is terrible. How does she keep her job then? Yeah, so the serious thing, you know, when she said she'd done 10 years at the Bank of England and she'd done six, and then she said she was an economist at HBOS and she was some sort of bank official, that to me is serious because actually a lot of people in the private sector would have been fired for a lot less. That I am worried about. There's a habit, I think, there. But, you know, would anyone else in that party do anything differently? I don't think so.

18:27Kwasi Kwarteng:So apparently Labour have now raised taxes by about$70 billion.

18:31Jeremy Hunt:Yeah, about that. So look, what happened? In two years. Well, barely. In 18 months, actually. They got in. So rewind the clock. And it's incredible how much has happened in a relatively short time The election was on the 4th of July and well. Yeah, it was the 4th of July Independence Day 4th of July 2024 that isn't that long ago. It's about what 16 months So they get in in July They say oh we've the evil Tories left us with a 22 billion black hole Half of that was that was the trade union deal because if you remember they whacked up train drivers pay They did a deal with nurses. They did a deal with doctors.

19:08Jeremy Hunt:So half of the 22 billion black hole was the public sector deal The pay deals that they did so it was 22 billion. We can test the figure but give them the 22 billion Then in November last year they raised taxes. I remember opening up the times 35 billion increase It wasn't 35 billion. It was 40 billion. They raised 40 billion in taxes last year and and 25 billion of that you know, 5, 8, 60 % was all on national insurance for employers. People like you, Rob. You know, you collectively paid 25 billion of that 40 billion. And she said at the time, you know, the evil Tories left such a mess. This is a stabilizing budget.

19:50Jeremy Hunt:I won't come back for more. She pretty much said that. This is a one-off 40 billion raise. And of course, yesterday, What was it 26 billion? Some people say it's towards 30 looking at the fine print So as you say you're right, it's at least 66 maybe up to 70 billion in two budgets And that's a huge amount of money and a lot of that is going to deal with with welfare so 26 billion if you look at the thrash thresholds, I think it's roughly about 8 billion and And the eight breaks down beautifully. Three billion is scrapping the cap on two child, the benefits for two children so that you can have more.

20:30Jeremy Hunt:If you have more children, you get benefits, that's three billion. And five billion was the welfare reform that they didn't get through. So the entire income tax increase in terms of freezing the threshold is going to welfare essentially.

20:45Kwasi Kwarteng:How does that make you feel?

20:47Jeremy Hunt:I'm concerned because I think, actually my biggest fear is that they get back in. And it won't be the Labour Party. It'll be a coalition of the left. Labour, the Greens, maybe a bit of Lib Dem in there. SMP, Plaid might have four or five, who knows. That's my biggest fear. Because then you'll get a much more left-wing government than if you can imagine it, you have today. That's my biggest fear. But we've got to just accept the fact they're going to be running the country for the other three years. My real fear also is that in that time, we've looked at their first two budgets, they've raised£40 billion the first time, they raised£26 billion in tax this year.