So, here we are on the other side of the weekend and Rachel Reeves misleading the nation about the public finances is not only still the story of the Budget, but is still running.

According to this morning’s Times, the latest group whom the Chancellor apparently mislead is… the Cabinet. Labour is circling the wagons and leaving both her and the Prime Minister outside the circle. Politics is a brutal game.

But sadly, there is more at stake in the Government’s economic policy than Reeves’ political future. We have to live in the economy that policy creates. How’s that looking? Not good, according to KPMG:

“In its latest economic outlook, KPMG said the economy will slow significantly after reporting growth of 1.4pc for 2025. After falling to 1pc next year, GDP growth will then bounce back to 1.4pc in 2027. Wage growth is also expected to fall towards 3pc by the middle of next year, KPMG said, while unemployment will hit a five-year high of 5.2pc. It is currently at 4.8pc.”

It’s the basic problem we’ve talked about before: whilst there might be a pro-growth argument for raising taxes to fund capital spending, there is none for so doing just to increase revenue spending such as welfare, which amounts to a direct cash transfer from productive to unproductive people. That’s what Reeves has done, so households are cutting back on their own spending, hurting the economy.

(Remember also that those growth percentages are not per-capita (i.e. adjusted for population), so a year in which Britain saw one per cent growth but had net immigration of ~700,000 it would not have got any richer, just bigger.)

Yet there are also two other stories which, although they’re about much smaller measures, shine a useful light on how this country ended up on its current, abject economic trajectory. The first is that some 110 council properties worth £2m or more aren’t going to be paying Reeves’ new mansion tax; the second is proposals for a ‘social tariff’ on water bills which will, in an unusual turn of events, see Northern bill-payers subsidising their southern counterparts.

As so often, one can see how we ended up with both measures. But each of them speaks to the way that repeated government efforts to legislate away the consequences of poor economic management simply produce more of those consequences.

On social housing, some might argue that it doesn’t make sense for government to levy taxes on money it is handing out in welfare (this is the case made for exempting pensions from Income Tax). But council and social housing is not a cash benefit, and tenants already pay council tax, so it doesn’t really apply here.

More compelling is that the idea of high property taxes, especially in a system with extremely restricted supply, is to encourage the more efficient distribution of housing stock by creating an economic incentive for people to downsize. Council and social tenants don’t own their properties, so there is little rationale for applying to them a levy intended to make people pay up or sell up.

Fair enough, on its own terms – but it simply highlights the increasing inefficiency and iniquity of our current subsidised housing regime. Not only does the exemption highlight how large social housing portfolios themselves prevent the efficient distribution of scarce property, but as both inflation and the long-term trend towards house price growth push more properties into the bracket, this exemption will cast a cold light on the terrible deal offered to productive, net-contributor taxpayers.

Simply put: why should someone who works and pays their way be subsidising other people not merely to be housed by the state, but to be housed by the state in a fabulously valuable property in a highly desirable postcode in central London to which that working person, unless they’re in the top couple of per cent of incomes or in line for a very handsome inheritance, cannot reasonably aspire themselves?

As for the proposal to end the ‘postcode lottery’ in water rates, the problem there is that the reason this lottery exists is because a) some parts of the country are much drier than others and b) we have as a nation spent over three decades doing nothing to build new water infrastructure.

Higher bills reflect a real higher cost of provision. This means that households internalise some of the cost of providing themselves with water and helps to regulate demand. It would normally, in a functioning market, incentivise the expansion of supply as providers were attracted by the higher revenues. But of course, despite the water companies’ best efforts, the drier South has been an inveterate opponent of new water infrastructure (reservoirs, in particular) whenever it has been proposed.

Acting to iron out regional variation in water bills would thus mean not only heaping additional costs on Northern households to subsidise Southern ones – a somewhat perverse outcome, given the general economic balance of the country – but also remove a factor regulating water demand in places where it is more expensive to provide, which will increase strain on water infrastructure. It will also mean specifically creating a subsidy to insulate communities such as the Vale of White Horse, whose council has fought tooth and nail against the proposed Abingdon Reservoir, from the consequences of their own preferences.

Each of these is, in the grand scheme of things, a relatively small policy change. But they are illustrative of the increasingly dysfunctional way the British economy is mismanaged. Government attempts to set prices and insulate favoured groups from economic reality, which makes economic reality worse, which leads to more attempts to fix prices and protect a wider range of favoured groups.

Meanwhile the shrinking share of taxpayers left out in the actual economy – the roughly one-third of adult citizens who are net contributors to the Exchequer and thus pay for everything – get a poorer and poorer deal which, eventually and inevitably, undermines their ability to go on paying for it.

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