But that is scant comfort for the great many who will now be forced not merely to tighten their belts but to quite possibly change the courses of their lives altogether.
Families will likely be forced to sell farms they have looked after for generations and national food security imperilled. Small businesses will scale back their ambitions, and fewer new jobs will be offered to those willing to put their hands to work.
From a coldly economic perspective, Labour is set to borrow £140bn more over this parliament than had previously been pencilled in. Bond markets were initially assuaged by the fact that £41bn of this is to be covered by higher taxes – mostly from employer contributions to National Insurance. But in the aftermath of Rachel Reeves’ speech, the yield on 10-year gilts spiked up from 4.2% to 4.5%, suggesting that lenders are not entirely sanguine about the Treasury’s plans.
Two schools of thought seem to be forming. One is that the net effect of this Budget will be a boost for the economy. Capital Economics argues that increased government spending, especially in public investment (up 0.7% of GDP), could spur growth.
The gloomier reaction is that government largesse will be more than cancelled out by dampened activity. With an unprecedented tax burden and energy prices at global highs, it is hardly an environment conducive to business expansion or entrepreneurial spark. If innovation, stewardship, learning and employment are firmly discouraged, it is hard to see where prosperity will come from.
In the opinion of the Office for Budgetary Responsibility (OBR), growth will be slightly higher in the short term than previously forecast, and then slightly lower towards the end of the decade.
As ever, we recommend taking such prognostications with a hefty pinch of salt. For instance, 18 months ago the OBR predicted that Contracts for Difference (CFDs) on subsidies to wind and solar generators would save nearly £10bn over this parliament; that has now been revised to a cost of nearly £12bn.
The future remains profoundly unknowable. Yet our fiscal policy remains extraordinarily in hock to crystal ball-gazers. Rachel Reeves has continued the habit of Chancellors to attempt to balance, very precisely, books written in delible ink.
We cannot know whether the anticipated tax take will match projections, exceed them, or indeed dwindle under its own weight. But as spending increases, and the fiscal burden is ratcheted up, the consequences of modelling error become all the more substantial.
In this light, an increase in government bond yields – i.e. borrowing costs – is rational. It is the price that lenders must impose for accepting greater uncertainty.
Added to this is the fact that sovereign bonds, especially in the UK, are increasingly held by short-termist macro hedge funds, rather than long-term holders such as pension asset managers. The former are far more fickle, and their skittish trading patterns can amplify volatility, as we saw in the Liability-Driven Investment (LDI) crisis of 2022.
We do not pretend to be able to foresee when another bout of market turmoil might flare up, either for UK gilts or indeed for US treasury bonds. But it is worth a reminder that, back in June, we refreshed portfolios with a new, more nuanced approach to risk.
The upshot of this change was that our Global Tracker Portfolios are now distinctly less susceptible to sudden yield shocks. They are therefore better prepared for a world still seemingly unwilling to countenance a smaller role for the state.
In summary, a strictly quantitative assessment indicates that the economy could benefit from Labour’s fiscal loosening, all else equal, in the short term. But one might very well conclude that dismal sentiment will discourage wealth creators and make a mockery of finely-tuned figures.
And, of course, all else will not be equal. Most predictions end up being wrong, and usually too pessimistic, because they under-estimate the capacity of people to change their behaviour, innovate, and generally improve their lot in lives. Equally, it is impossible to quantify the harm of policies that tread on this spirit.
Important information
This article does not constitute advice. Tax laws are subject to change and taxation will vary depending on individual circumstances.