At the helm right now, we have a Chancellor, who is devoid of any business acumen, appears to have no foresight and possibly doesn't give a proverbial about what she's wrought on businesses with the most punitive measures. In hindsight national economy actually worksthis administration came in on a "we're going for growth" mantra. Definitely some ambiguity in that message, there has in fact been plenty of growth in businesses going to the wall, and unemployment rising as a result.
It's not so much Reeves' lack of business acumen that is at fault as her complete lack of understanding of how a national economy actually works.
Her failing is that she appears to be fixated on the myth that only businesses 'create wealth'. This has no logic to it all because the only source of money/wealth in the economy is the state. No business can create money, it can only acquire the state created money that is already in the economy.
Money is issued into the economy in two ways. It is issued by the state spending on goods and services, or by banks, under licence from the state, making loans (for every loan that that a state licenced bank makes is completely new money.
I know that people firmly believe that state spending is financed by tax revenue, but it isn't. As an example, Quantitative Easing, which has been resorted to at least twice in the last 25 years (after the GFC and during Covid) is pure money creation by the Bank of England under orders from the state. There is no tax revenue involved in it. No pretence that it came out of tax revenue as there is about everyday state spending. The two are pure money creation. Taxation is intended to reclaim some if the issued money in order to avoid inflation. (That isn't taxation's only function but in this instance it is only relevant to avoidance of inflation)
Once the money has been issued its function is to enable economic activity in the state. In the case of money issued by banks there is no permanent increase in the money supply because loans have to be repaid in full. Once they have been repaid the money ceases to exist. It doesn't swell the coffers of the bank, it ceases to exist. The only part of the loan that swells the bank's coffers is the interest payable on it which is paid out of money which already exists. Before it has been repaid the loan money can be used to promote economic activity.
Money spent into existence by the state functions slightly differently. It is the same in that it pays state employees' wages and salaries, it goes to the private enterprises which the state buys goods and services from, so promoting rounds of economic activity as their employees spend their wages and the enterprises buy goods and services to support their businesses.
Both bank loans and state spending put new money into the economy and in both instances the money creates economic activity. But there is an essential difference between the two.
Bank money is ultimately completely destroyed on repayment of the loan. You cannot save any money from a bank loan as it has to be repaid in full, plus the interest.
State issued money can be saved, either long term or short term because the state doesn't directly take it all back in tax. There is always some outstanding, some of which, if it is spent in another country, the state will never get back (unless it can be returned in payment for exports) the rest of which is people's savings
The difference between what the state spends and what it gets back via taxation is the 'deficit'. Without a deficit we wouldn't be able to save our money or spend it abroad.
This is a simplified version of how a national economy works but the essentials are there. It shows that businesses are not wealth creators, they can only acquire money which has been issued/created by the state and they acquire it by selling to the citizens of the state, who have only state created money with which to purchase their goods and services.
The wrongness of a chancellor believing that only taxation can pay for state services and then raising taxes to 'pay for them' while simultaneously cutting the money available to state services ('efficiency savings, aka ;austerity') is shown in the effects which *BlueBelle describes. It reduces the money supply, reduces the money available to people to pay for goods and services they need or want and puts the suppliers of the goods and services out of business because people can't afford to buy what they are producing.
It really doesn't take a degree in economics to understand this. It does, though take a willingness to discard the belief that taxation funds public services and that businesses are 'wealth creators'.