Rachel Reeves’s worst mistake defines her forever – blunder breaks UK | Personal Finance | Finance
The problem is not the winter fuel payment debacle and partial U-turn. Nor is it a failure to tackle the ballooning sickness benefits bill. Or “modest” tax increases of £8.5bn, which have already risen to over £66bn. Not the inheritance tax raids on farmers and small firms, or even last October’s chaotic Budget. These are lost in the face of his biggest mistake. Because something absolutely terrifying is bearing down on England right now.
Artificial intelligence is advancing at a dizzying pace and threatens to shatter white-collar Britain, just as globalization has emptied blue-collar northern towns. Investment bank Morgan Stanley has warned that the UK could be among the hardest-hit advanced economies given the size of our services sector. Analysts estimate that a third of jobs in the UK are subject to automation through generative AI, with finance, legal services, accounting, marketing and administrative roles most at risk. Here’s a scary list of 44 careers that are at risk right now.
These are the middle-class, postgraduate careers that form the backbone of Britain’s tax base. Worse still, displaced office workers may struggle to retrain quickly enough and may be flooded into a labor market that cannot absorb them. So what does this have to do with Rachel Reeves? I will tell you.
Reeves was stuck approaching his first budget in October 2024. Every obvious tax increase threatened to stifle growth. Then suddenly he came up with what he thought was an easy answer: increasing employer National Insurance contributions to £26bn.
Labor hated the work and thought it would just cover the costs. Wrong. The NI raid turned out to be a direct tax on jobs and the working people Labor claimed to protect. Companies pay a percentage of each employee’s salary above a certain threshold. When you increase this rate or lower the threshold, the cost of hiring increases immediately. Reeves did both. Starting in April 2025, every worker became more expensive overnight.
Deutsche Bank warned the move could cost 100,000 jobs. Other analysts have suggested the figure could be twice that. Tax expert Dan Neidle, who is sympathetic to Labour, said it was the worst possible tax. But Reeves moved on. Just as technology has made it easier than ever for companies to replace people with software.
The labor market is already weakening. Under Reeves, unemployment rose from 4.1% to 5.1%, and that’s just the beginning. Youth unemployment is rising rapidly; The unemployment rate in the UK is outpacing Europe for the first time in years. Quotas are decreasing. Hiring intentions are changing. And everything is about to get worse.
The Chancellor has also secured above-inflation increases to the National Living Wage in both April 2025 and 2026. Generous? Maybe. But employers pay the bill. Instead, they will respond by cutting hours, freezing hiring, or investing in automation.
Add in punitive job rates, increased regulations and Angela Rayner’s Employment Rights Bill, which will make it more difficult and risky to fire staff, and the incentive to hire is collapsing further.
Machine learning systems and generative algorithms are about to wreak havoc. This won’t just cost jobs. It could shake the foundations of the UK. If unemployment rises the welfare bill implodes. Tax revenues are falling. Home prices weaken as buyers disappear. Rents are coming under pressure. As spending power dried up, the main streets became empty. Long-term youth unemployment has been negatively impacting earnings and prospects for decades.
Reeves is not responsible for the technology. But it is responsible for making human workers more expensive, just at a time when companies are deciding whether to replace them en masse.
Labor is popular with young voters. Not for long. By increasing the tax on jobs at the worst possible time, Reeves gave companies a huge tax incentive to replace young workers with machines. Artificial intelligence will trigger major economic and social upheaval. And like everything she touched, Rachel Reeves made it worse. This is shaping up to be a mistake of historic proportions.
