Chancellor announces changes to employers’ national insurance contributions, inheritance tax, capital gains tax and other duties

• Budget 2024: key points at a glance

George Osborne is credited with popularising the baseline theory of economic policy, which says the government always has the advantage in politics because, at budgets, it sets the baseline, and so if the opposition wants to do anything different, it has to explain what spending it is going to cut (if it wants to reduce taxes), or what taxes it is going to raise (if it wants to increase spending). Voters are inclined to punish parties that declare they are going to depart wildly from the baseline, and so in recent years the main opposition party is often wary of making extravagant manifesto promises.

Today Rachel Reeves is resetting the baseline – and, in doing so, she is creating a trap for the Conservatives.

At first sight, unleashing a wave of money to build new roads, railways and hospitals sounds great. Yet, nothing in this world is ever free. Changing the rules doesn’t change the fundamental position the UK is in; there is no magic money tree which has suddenly been miraculously found. This is a technical change which, however it is dressed up, is ultimately more borrowing. And it’s about time that Labour levelled with people about the consequence of their attempts to fiddle the figures …

Technical changes have real world consequences. Ultimately, debt is debt. The more we take on, the more risky and less resilient our country becomes to investors. As soon as Reeves dribbled out news of her con trick, yields on UK bonds started to rise. Some commentators now expect interest rates to be cut more slowly. Every month that interest rates don’t come down means another 120,000 households across the country fixing their mortgages higher than they otherwise would. And, over time, higher gilt rates means higher taxes or lower spending elsewhere. For a Labour party which mercilessly hounded Liz Truss in 2022 for real-world impacts, the principle is the same. Actions have consequences – and Labour appear to have learnt nothing.

Despite the rise in gilt yields in the past month, average two-year fixed residential mortgage rates have fallen modestly, from 5.43% a month ago, to 5.39% on Monday, according to the data provider Moneyfacts.

High street banks price their fixed mortgage deals on money market “swap rates”, which are influenced by expectations for the Bank of England’s base rate. Financial markets expect the Bank will cut its base rate from 5% at present to about 3.75% before the end of next year.