Rachel Reeves hinted this week at what many of us suspected: Labour plans to raise taxes in the budget to fund higher spending. Yes, she’s pitching this as fixing a £22 billion fiscal “black hole” left this year by the Conservatives. And there’s some truth to that: unexpected costs on asylum seekers, coupled with unresolved pay disputes, meant that the spending plans she inherited were tight for the previous government’s ambitions, let alone hers.

The thing is: Labour isn’t in opposition any more. It need not accept pay bodies’ full recommendations, nor is it obligated to create Great British Energy or capitalise a new National Wealth Fund. Sir Keir Starmer’s government could cut programmes, trim welfare, or scale back green and overseas commitments instead of breaking the electoral promise of “no additional tax rises”. Its rejection of these options reveals its preference: for bigger government.

This brings us to the politics of what’s coming. Labour clearly reckons that taxpayers want public services fixed and will accept ponying up more money to try to achieve it. Pollsters agree. In June, Ipsos reported that 40 per cent of people wanted more spending even if it meant higher personal taxes, far exceeding the 27 per cent who wanted to cut both. Polls that use the NHS as the example public service, such as the recent Abrdn financial fairness trust survey, show even wider gaps.

Yet might this support be softer than Labour thinks? Households often underestimate their existing tax burden, as some taxes are hidden (like VAT or national insurance) or indirect (like corporation tax, partially borne through lower wages). Borrowing makes spending seem cheaper, and the public often don’t know how their money is spent by the government. All these “fiscal illusions” can increase support for higher taxes and spending.

Enter Kaetana Numa, an economist at King’s College London. Her recent paper surveyed a large sample of UK working-age employees in 2018. After providing answers on their work and spending patterns, half were given personalised estimates of how much they already paid in most major taxes and a broad overview of how that revenue was currently spent by the government. Her research question: would seeing this personalised fiscal balance sheet change attitudes towards taxes and spending?

It did. Getting personalised tax information made respondents more than 12 per cent more likely to say they preferred a lower tax burden and over 5 per cent less likely to prefer a higher one, a result consistent across demographic groups. Seeing how much they paid made the public more inclined to support reducing all major individual taxes, in fact, except for fuel duty.

More surprisingly, personalised fiscal information reduced the appeal of higher public spending. Those informed about how their tax money was spent were 22 per cent more likely to say they desired lower spending and 20 per cent less likely to prefer higher spending than the control group. The biggest fall in support for increasing spending came for the NHS, education and state pensions — areas where polls usually show strong public support for more funding.

Now, none of this is to say that support for more public spending hasn’t gone up in recent years, but there are obvious lessons here for both parties. If a new Conservative leader really wanted a smaller state, they should increase the salience of the tax and spending burden to households. Commission websites and apps with calculators like Numa’s, perhaps. Or propose making VAT transparent on product prices or adding fiscal balance sheets for different types of households in budget documents.

For Labour, Numa’s work provides a warning. A significant chunk of the electorate don’t really comprehend how much they pay in taxes or what these payments fund. When informed, they are less inclined to accept Labour’s medicine. No wonder Reeves wants to get this out of the way early in the parliament.