Rachel Reeves demands we all 'do our bit' - but she's about to unleash a two-tier Budget

Rachel Reeves has to plug a £30billion black hole in the nation's finances, and she's going to hit us with everything in her locker, possibly including 2p on income tax. She's also eyeing the Cash ISA, pension tax breaks, inheritances and homes. Motorists, drinkers and smokers may also be targeted.

She's trying to guilt-trip people into accepting the onslaught by saying that "each of us must do our bit". Yet one sector of society will get off lightly, and they share a key characteristic. They're far more likely to vote Labour.

The party has a history of taxing the private sector, while protecting public sector workers.

A classic example was former Labour chancellor Gordon Brown's 1997 stealth tax raid on private sector pensions.

Today, almost no private sector employer offers gold-plated defined benefit 'final salary' pension schemes. They only survive in the public sector. Brown didn't touch them.

Today, the average public sector pension is roughly three times as big as the average private sector pot, the TaxPayers' Alliance calculates. Yet which one has Reeves attacked? Duh. Private sector pensions.

In her maiden Budget she slapped inheritance tax on unused defined contribution pensions, the inferior type that most private workers now rely on.

She may go after pensions again this month. One option is cutting higher-rate tax relief on pension contributions, which helps the better off.

But one thing could stop her. Gary Smith, a retirement specialist at advisers Evelyn Partners, says this would cause uproar among senior public sector workers "unless there was a controversial carve-out for the public sector".

In other words, the only reason it won't happen is that it risks upsetting a protected Labour voting base. Incidentally, this is also the only reason Labour hasn't reinstated the controversial pensions lifetime allowance, as it originally pledged. It would hit NHS doctors, teachers and other higher paid public sector workers.

Private pension savers, however, remain fair game. And it's a similar story on pay.

One of the first things Reeves did after the election was approve a £9.4billion public sector pay rise, widening the hole in the public finances and firing up inflation.

The result? Public sector wages are now rising at 6% a year, against just 4.4% in the private sector.

Reeves's £25billion "jobs tax" in last year's Budget destroyed around 276,000 posts but once again, the public sector is shielded.

Another 6,000 civil servants have been hired since the election, lifting the total to 516,150, a 20-year high. No hiring problems there.

Which brings me to a serious underlying problem. Public sector productivity has barely shifted since 1999, while private sector output per hour has risen by a third. It's got worse since the pandemic.

Accountants EY calculate that if public sector productivity had kept pace since 2019, the UK economy would be around 3% larger.

That's roughly £80billion a year in lost output, which would fill Reeves's black hole and then some. With public sector spending now accounting for 44% of GDP, this is a massive problem.

The more money Reeves throws at the public sector, the less productive it becomes. Which means the productivity gap will only widen. And guess who'll pay? The private sector.

The public sector includes vital workers such as doctors, teachers, soldiers and tax collectors. They deserve to be paid well and get good pensions. But Labour has to strike a fair balance, and right now, it doesn't feel like it.