What was important about the Spring Statement from Rachel Reeves was what it did not say - like mortgage rates are going to rise by at least one percent, alongside house prices. We really are in a mess.
Please excuse the absence of visuals. I recorded this outside the BBC earlier this afternoon whilst having a coffee, having departed Jeremy Vine's studio.
This is the audio version:
This is the transcript:
Rachel Reeves has made her spring statement, the world has noticed, but has not yet absorbed the consequences of what she had to say.
A great deal of what she said was about numbers, which are, in the grand scheme of things, very small, but which have massive consequences for individuals.
This is very obviously, most especially true for those who are on disability benefits who might suffer a loss of thousands of pounds a year as a consequence of the £5 billion of cuts that are going to be imposed on them.
And this is also going to have massive consequences for up to 80,000 civil servants who she is planning to cut out of government, which is absolutely crucial if she's going to find the £6 billion of saving that she's going to get from supposedly increasing the efficiency of government departments - although absolutely nobody knows how this is possible, and the Conservatives certainly never managed it despite claiming that this was their objective.
So, for some particular people in the economy, things look very bad.
But what wasn't clear from what was said in the Commons, either by Rachel Reeves or by Mel Stride, who opposed her from the Conservative benches, was just how significant the forecast made by the Office for Budget Responsibility are.
In particular, growth is going to be very weak. They halved their growth forecast for this year, but when you actually look at the growth forecasts when they are adjusted to growth per person rather than growth as a whole, the figures are very weak indeed. In fact, by 2029, which is of course when Labour is hoping to go to the country, having claimed that it has delivered on its promise to make everyone better off by having grown the economy, we are going to discover that actual overall growth is just 1.4% per person, which is not going to be enough to notice any significant difference to wellbeing.
So, Rachel Reeves is already forecast to fail on her fundamental objective of growing the economy, and therefore, she will not be able to deliver everything else that she has talked about with regard to public services.
But things are actually potentially worse than that because when I began to work through the details, some really quite surprising numbers came out.
One in particular shouted at me. That is that the cost of government borrowing is forecast to go up by 1% in interest rate terms over the next year. In other words, the interest rate that the government is going to pay on its borrowing is going to increase from roughly 4% on average to over 5%.
And when I checked through to see whether this was going to have a consequence for mortgage costs, yes it is. It is forecast that the average cost of mortgage borrowing, which is again around 4% for most people at present - and again, that's an average - is going to increase to over 5% over her forecast period between now and 2029, with the biggest increase being seen over the next year or so. So, the cost of mortgages is forecast to rise significantly in this Spring Statement.
At the same time, Rachel Reeves, or rather the Office for Budget Responsibility, are forecasting that house prices will go up heavily. In fact, they are forecasting that they will increase as much between 2025 and 2029 as they have done between 2019 and now, and that is a real terms increase. So not only is the cost of borrowing to buy a house going to increase, but the cost of buying a house is going to rise as well. And that means that yet more young people are going to be locked into renting forever.
As a result, we are going to see ever-increasing concentrations of home ownership in the country.
Then, when I began to look elsewhere in the forecast, I found other numbers that just do not make sense. For example, the government is, according to this forecast, going to cut its overall level of borrowing quite significantly so that she can meet her fiscal rule.
Well, that has been forecast by the Office for Budget Responsibility in every single forecast that they have put out since 2010, and overall, it's never happened.
But more than that, they are actually suggesting that households are going to dissave over the next few years. In other words, they're going to reduce the amount of money that they have on deposit, so therefore their savings, and so their wealth on average, is going to go down. Now that's quite surprising. That isn't what makes people feel good about themselves. That isn't how you make people feel more prosperous.
So, the consequence is that overall, she's not going to achieve her goal because, in practice, people are going to borrow because they're not going to have enough to live on otherwise.
And that to me is one of the clearest messages that came out from all the budget figures that I've looked at so far.
And finally, she has made her figures balance by presuming that more people from outside the UK are going to save in the UK in sterling than ever before. What explains this sudden enthusiasm for the world at large to pour money into the UK purely for savings purposes - except that exceptional interest rate that we are going to offer - is hard to explain, but I suspect that is the whole reason why she is forecasting, and the Office for Budget Responsibility is forecasting this increase in interest rate. I cannot see any other reason for it.
So, we are literally going to be charging ourselves enormous rates of interest to impoverish younger families with mortgages or those in rented accommodation - because rental accommodation tends to move very much in line with the interest rate in terms of prices charged - massive premiums, because we are going to have to borrow money from abroad to make up for the shortfall in what Rachel Reeve sees is likely in the overall balance of the UK economy because she really has no growth plan.
If you want to look at a recipe for disaster, that is it. She's going to charge us for her failure, and little is more obvious about this than that one statement.
Rachel Reeves' Spring Statement is a recipe for disaster.
She has no idea how to manage the economy.
She's way out of her depth, and she's resorting to the oldest trick in the book, which is to borrow foreign money to keep the UK going at cost to all the more vulnerable households in the UK.
I really do think that this is beyond a joke.
It is time that Rachel Reeves went. Keir Starmer needs to reshuffle his cabinet very urgently, and as a consequence, we might then get a viable Chancellor of the Exchequer. But right now, Rachel Reeves is not that person.
This was a terrible Statement, offering a terrible forecast for the next five years in the UK.
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Foreign money from where?
if the pound falls the real debt will of course, be higher.
I have an ex-student who is disabled and terrified.
I have two family members who are civil servants and concerned. They do have mortgage but if get off the housing ladder there is precious hope of getting back on.
And it is unnecessary to inflict that amount of pain. It turns the story into a tragedy.
” … those who are on disability benefits who might suffer a loss of thousands of pounds a year as a consequence of the £5 billion of cuts that are going to be imposed on them.”
In a previous thread on this topic, I noted that, as a long-term non-resident, I had written to my UK (Labour) MP to express my concerns. So I thought it worth noting that today I was pleased to receive a detailed and encouraging reply.
In essence, while he sees as positive certain elements of the proposed report concerned with helping people able to work to do so (with appropriate support), he expressed “very serious concerns” aboutothers, notably the measures relating to PIP and delaying certain health benefits to age 22.
In conclusion he writes:
“The Government has said they will now consult with disability groups. Your views and that of all other constituents, play a big part in supporting me to relay my concerns to the Secretary of State and press for changes.
I did not come into politics to make vulnerable and disabled groups poorer. I agree that support should be given to help people back into work but I fear that some of the proposals would only make things worse for those in a vulnerable position.
As it stands, because of the concerns I have above, I cannot support the changes that are being proposed.”
Useful….
Someone with a bit of courage
Indeed Richard – I was heartened to find he agreed with me and will reply to thank him for his excellent letter.
But he needs to be joined by many more than the 30 or so backbengers believed (according to the Guardian) likely to vote against. We can only hope yesterday’s even worse Austerity Statement (aka the Spring Statement) may prove to be the tipping point needed to push more to find the courage to stand up for their convictions. Maybe I’ll send my MP your Taxing Wealth Report with ideas to put forward to help enable the changes he seeks.
Please do….
Done.
Who of the available people would you like to be chancellor?
Allowing they had a free hand.
I am not sure there is anyone with the required knowledge and experience of government in Labour right now. I stress, it is both.
How about Chi Onwura? A chartered Engineer with an MBA, with experience in both private industry and at Ofcom (where I first encountered her, and realised quickly she has a brain sharper than my own). She also comes from Newcastle, so not South-East centric, and has a good reputation as a constituency MP.
So far her highest role in Parliament has been as Shadow Minister for Science, Research and Innovation, but I think she is destined for much higher things.
https://chionwurahmp.com/about-me/
Just not enough experience
That’s the issue
Maybe that’s a good thing? Those with ‘experience’ don’t seem to have learned from it!
Nothing of course to put any controls on who is allowed to own land and homes in the UK or how many properties they can have.
neither is there any target for average house prices
As someone who will be effected by these changes (probably lose house) I found this report disturbing…
https://www.disabilityrightsuk.org/news/dwp-launches-entirely-bogus-green-paper-consultation
All such consultations are bogus
Edward I am so sorry that these changes will affect you personally. When we talk about people losing their homes, or living in expensive rental accommodation ( some not fit for purpose) Losing their jobs and benefits we find ourselves in a society that does not care. Its a very precarious country we are living in, everyone is fearful and structures are falling apart and who is accountable? Its all such a mess that you really wonder what we can do. One thing we can do is keep caring for our neighbours in whatever way we can, pick something you feel strongly about and there are many to choose from, Richard gives us many choices each day to think about and write and meet with our MPs and keep spreading the word that there is a different way to do things. All of this makes me so sad but rather than being sad I’m going to be mad about the injustice and the mess our country is in. I have never really been political but feel this blog and suggestions for other research and reading has opened my mind to what is going on in the world just now.
Thanks
Depressing to hear the chair of the Treasury Select Committee, Meg Hillier, refer this afternoon in the Commons, to the government spending “taxpayers’ money”.
https://hansard.parliament.uk/Commons/2025-03-26/debates/CD77EAF2-8DB9-4F16-93CA-3E244CA9079E/SpringStatement#contribution-D908DD6D-6FD3-4989-9C14-16B25706463B
If the chair of the select committe entrusted with scrutinising the Treasury on our behalf doesn’t understand where money comes from there’s not a lot of point in them meeting.
Perhaps we could write to the committee clerk
treascom@parliament.uk
asking for Ms Hillier to explore two questions when they examine the Spring statement (both must be attempted)…
https://committees.parliament.uk/work/9035/spring-statement-2025/
1. Where does government spending money come from?
2. Where does taxpayers’ money come from?
Be a bit embarrassing if no one in the room knows the answer, wouldn’t it? I suspect they will dodge that one completely. The committee hearing is on 1st & 2nd April. Cast list available in the above links, Paul Johnson et al on April Fools’ Day, Rachel Reeves et al on 2nd April.
I sent in my email to the committee & got an auto-reply.
Also – on checking, guess what Ms Hillier studied at Oxford?
You got it, PPE!
All I could think of was who had paid for the maroon/zippered trouser suit she was wearing.
On top of this, it seems Farage has noticed the growing movement around inequality and has decided to jump on board, but by blaming immigrants. In parliament he criticised the governments use of GDP, saying that GDP person is more telling. He then blathered on about immigration being the reason for low GDP per person, ruining what could have been a good point, but also showing the tack he is going to take. Highjack the debate around inequality for his own purposes. Probably a tactic handed to him by the Heritage Foundation or something like that.
I did some very simple-minded sums on cutting benefits and GDP/head today. If just over 4% of disabled people on benefits die because of these cuts, this would add 1% to GDP/head. Period not included; it could be over 6 mnths or 6 years. I wish I could believe that this hadn’t crossed the govt’s mind at any point. But after all, the govt only cares about workers, and these people are very probably not working.
Whether it crossed their minds or not, it’s sad that we are driven to the point where we ask the question. Their actions appear so callous that we have no choice but to consider their true motives.
The expected significant increase in house prices is something Gary Stevenson has been talking about for a while now.
I saw a clip of him on Question Time, I think he did reasonably well in the circumstances. I do hope he can work with you to push better alternatives to the wealth taxes ideas