As Sky News has reported:
Rachel Reeves has told Sky News she is looking at both tax rises and spending cuts in the budget, in her first interview since being briefed on the scale of the fiscal black hole she faces.
"Of course, we're looking at tax and spending as well," the chancellor said when asked how she would deal with the country's economic challenges in her 26 November statement.
Both of these are admissions.
And both are, of course, unnecessary. There is no blackhole in Reeves' budget. Instead, she might break her own utterly meaningless fiscal rule. As a result, it is likely that she will:
- Reduce the spending power of people with average and lower incomes, which will shrink the economy.
- Cut government spending, which will shrink the economy.
- Reduce the impact of multiplier effects, which will shrink the economy.
- Leave the impacts of wealth and savings in the economy almost untouched, meaning she will not address the means available to grow the economy.
The sense that Labour's sole goal is to make everything as bad as possible so that Reform can deliver a home run in the next election grows by the day.
What is clear is that there is, at present, nothing that Rachel Reeves is planning that might in any way address the real black holes we have in and surrounding our economy, including issues such as:
- Lower income spending power
- Child poverty
- Inequality
- Job creation in essential sectors
- Lack of investment in:
- Housing
- Green energy
- Flood defences
- Hospitals and schools that are falling down
- Sustainability
The consequence? I am anticipating dismal failure and worst outcomes.
It takes staggering incompetence to get as much wrong as Reeves is doing as Chancellor, but you have to give her full marks for effort in her endeavours: she really is doing her best to fail.
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It’s the main line to economic failure, familiar from years of neoliberal economics. RR can’t see the buffers at the terminus, let alone any alternative route.
Shovel all the coal in, gotta keep it rollin’ , never understanding that MMT…
🙂
This needs considering alongside Reform UK Ltd’s abandonment of their 2024 entire economic policy leaving them policy-free, to promise anything, criticise anything anyone else says, and blame immigration for everything, and giving Fa***e a letout from awkward economic questions (not that journalists ever ask him any).
I think every challenge to Reeves has to include a blast at Farage at the same time exposing his hypocrisy, his incompetence, his corrupt attachments, and his lack of any coherent economic plan.
My main concern is that if/when Reform form a government (which at this moment seems almost inevitable), through sheer incompetence they will enact the same sort of budget that Liz Truss attempted, and through sheer pigheadedness successfully push it through.
When they realise that the sky doesn’t fall despite the massive budget deficit blowout, they will have stumbled upon elements of MMT by chance and be hailed as economic geniuses. They will of course take completely the wrong lessons, but they might buy themselves enough time and goodwill to do some terrible things.
Mr Far-right-rage is an economic see-saw and sees weakness. Swings from tax cuts above else one week to sound budget discipline the next. No clear strategy, no strategy at all. Walk right on by.
Does ‘Rachel from accounts’ actually know that this fiscal rule is meaningless and made up? Or does she actually think it is a genuine economic rule? If it’s the former then she is being misleading (maybe lying to use a stronger word). If it’s the latter then she is incompetent.
Neither is a good look.
And to mention this again, why is it when tough decisions have to be made that it is those who are in the worse position to withstand those tough decisions who are made to do so?
Craig
P.S. GOGS (Grumpy Old Git Syndrome) kicking in early today 🙂
Love the GOGS acronym. We must form a new pressure group!
As a 68 year old GOG it seems to me that Rachel Reeves is just repeating the same tired and false message that we have had imposed on us each and every year since 1979 by the political class. It’s time to change this broken record. On my travels yesterday I reflected on a simple point – the likes of Rachel Reeves like to boast that we are the sixth richest economy in the world so how come we cannot find the money to fill in our potholes? I say this a one who had to fork out £200 for a new spring on one of my rear wheels.
Why is this being allowed to happen. Like you say giving reform a clear home run. Even Martin this morning on GMB indicated that the rate of inflation is not eased by the knowledge that next year it will fall. He gave two reasons one that its because they are making a forecast based on assumptions. Secondly, that drop in inflation will be added to the 3.4 this year. Not that prices will fall but will increase.
Could it be that like Trump (now) & Putin (2022), Reeves is being fed info that fits with her orthodoxy? (prejudices/muscle twitch). What passes for the UK’s economic system (as defined in the environs of wezzie) does what it does independent of what party is in power (e.g. austerity 2010 – 2015 under LyingDems & Tories). I rather doubt that the system can be reformed and as per yesterdays blog on flooding – I rather doubt it is capable of reform even when faced with e.g. most of London’s South bank underwater or Deform winning the next election. “The System” is beyond reform & attempts to reform it will be met with resistance. The politicos are not the only problem (indeed the minor one), it is the UKs FinMin, BoE & the penumbra of bank parasites that surround these three “nodes”. Let’s say you have a reforming gov? FinMIn & BoE & banks gang up and slow/stop reform. I am not sure what the solution is, but the problem looks pretty intractable – given the line up of players.
A paradigm shift is coming, and overdue. In science, this happens when problems with the old system of ideas build up, and suddenly many see that a different organisation of ideas is possible and fits the evidence better. Think of the change from static continents to plate tectonics, from “coming Ice Age” to global warming, from mechanistic ideas of organisms to system view. And, of course, changes to quantum mechanics, changes towards relativistic thinking. This change is coming to economic thinking. We should get from arguments about country/household, to “Do you still think THAT? So out of date, out of touch.” Many prefer to be fashionable, rather than look at evidence.
Surely Reform’s next manifesto will include a bonfire of the “establishment” and the civil service.
Trump hears what he wants because he appoints people to tell him that and just lambasts those who don’t agree, such as Jerome Powell at the Federal Reserve, where Trump also “fired” governor Lisa Cook. Trump doesn’t like the Fed’s failure to cut interest rates in the way he thinks they should (putting it mildly) and if it were up to him he’d presumably dictate every decision.
Farage will follow the same playbook and will presumably dispense with the “independence” of the BoE so that he can call all the shots. In the absence of a constituion like the US, he’d be free to do that, and critics be damned…
Apparently Reeves has said the UK is a “beacon of economic stability”. If the Chancellor said it surely it must be true?
She should know, shouldn’t she?
🙂
By ‘stability’ – that is coded language / virtue signalling to the markets for ‘I’m not changing anything and keeping the money rolling in for vulture capitalism like the Tories did’.
And as we know in quantum terms courtesy of the Murphy household, stability like this is death.
What does this say about thinking within HM Treasury, who are presumably among RR’s advisers?
I saw on another blog (sorry can’t remember the link now), someone saying that since we know that Commercial Banks create new money each time they make a loan, at the cost of just pressing a few keys on a computer, why are they allowed to charge interest?
Even if the person taking a loan defaults, there is not really a cost to the Bank – indeed a little more money exists in the economy as a whole over the long term, since it will not have been removed by paying back the loan.
There is a little admin cost – why shouldn’t banks making loans just be allowed at best, to only charge a flat one-off fee?
Because by convention we do
Massess of it
Much more than the bad debt risk.
Why? Because the wealthy want it that way?
No. When a bank lends it automatically creates a deposit (from said lender). Once the lender goes and buys something with that money then the bank needs to borrow – and the rate it has to pay to borrow is a “market rate” that will be closely linked to the base rate. If the lender defaults then the bank loses the money as it is still obliged to repay the depositor.
The “fair” rate should be Base Rate plus a some extra to cover the risk of default, admin and other costs (eg meeting LCR and NSFR etc.).
Now, we can quibble about what base Rate should be; we can argue about what “extra” should be charged…. but the idea that no interest should be charged is nonsense.
But, let’s just look in aggregate here – who do they borrow from?
Each other?
Who else?
The BoE?
Or are you saying depositors?
You argument seems to come down to we pay interest because bankers want us to. So the right question remains, why do we need to, which is not the same thing.
Dusting off my legendary PhD in the Bleeding Obvious if Rachel from Accounts doesn’t spend a certain amount next year on what I would loosely call ‘the public estate’ roads, schools, hospitals etc then they will continue to deteriorate as there won’t be enough money to maintain them
Simples
But I bet she won’t
You need to be advising her
No one else is pointing out the bleedin’ obvious
I shan’t add any more on Reeves (she’s a lost cause). But I will add some points which are going to have a very negative impact on the likelihood that Reform get anywhere at the next general election, because they concern Fartrage and co who have fully aligning themselves with: Trumpism, which is about to explode – big time.
For example, the impact of tariffs on Soybean farmers: who are about to be wiped out because their biggest market – China – has bought NO soybeans this year. To make matters even worse, yesterday Trump hosted the mad libertarian, authoritarian who now runs Argentina, and the US “lent” him $20 billion (he’d already had a similar size loan from the IMF) to (try) to stop the Argentinian economy from collapsing, while at the same time Argentina (and Brazil) took over supplying soybeans to China (that previously came from the US). This HAS NOT escaped Republican supporting US farmers (see Chris Hayes, the top segment: https://www.msnbc.com/all)
Additionally, an analysis of the impact of tariffs published on Monday (by a “pro” Trump US bank) shows that US importers and consumer are paying 80%+ of the cost of tariffs. This includes John Deere tractors, who expect to “lose” $600 million in costs, and Ford, who are on the hook for a similar amount. So much for the tariff policy, which now has nowhere to go, except to keep lying that black is white when everyone can see – and, worse still for Trump – experience, the truth.
Second, this weekend sees “No Kings” rallies all across the US, with crowds expected to exceed those back in June (5 million) by a sizeable margin. Meanwhile, Josh Rogan (a Trumpist blooger with a huge following), and Marjorie Taylor Greene, have both spoken out publicly against what ICE is doing. So, the MAGA dam on dissent has been breached. See this report on MSNBC by Nicole Wallace https://www.msnbc.com/deadline-white-house
Finally, yesterday Politico published emails between “Young Republicans”, at least one of which is in Trump’s government, and numerous others at state level, that demonstrate what emerges when people on the right are enabled to voice their true opinions on many topics, but particularly race and religion: they are racist and anti-semitic to the core.
See here for the full story: https://www.msnbc.com/the-last-word/watch/lawrence-trump-admin-staffer-reportedly-in-an-i-love-hitler-chat-hasn-t-been-fired-by-trump-yet-249911365730
Yiu guve me hopoe, Ivan.
I mentioned the soya bean issue here some time ago.
The reality of this is going to hit Trump very hard. The MidWest will not forget.
For the last 45 years we have had successive governments of whatever political hue pursue policies of cutting tax for some, increasing taxes on the majority, deregulation and slashing public spending and investment (apart from one or two political vanity projects or ill judged military escapades). And each year productivity shrinks and the public finances supposedly suffer resulting in yet another round of spending cuts and tax rises. Now Rachel from Accounts wants to implement more of the same in her pursuit of the economic unicorn called “growth”. Isn’t the definition of insanity the repeated pursuit of the same experiment in the hope that this time around the outcome will be different?
It has become so desperate that Rachel from Accounts has had to state the bleeding obvious I.e. that part of the UK’s problem is the result of Brexit. Perhaps we can now have a full and honest debate on how the political class dragged us into this mess and also to shame those behind it e.g. Johnson, Gove and the idiots who sucked up to them.
None of this will, however, save neoliberalism. It’s demise is long overdue.
Why not just start talks about going back?
Wouldn’t that be the obvious thing to do?
I am not sure that the EU will want to open negotiations for the UK to rejoin
I understand that they would be looking for at least 60 per cent support for rejoining for several years
While Farage and his ilk are active that’s unlikely
Noted
It’s still difficult to get my head around this talk of a ‘home run’ for Reform / F…ge.
The now proven charge of Russian bribery of F…ge’s close colleague Nathan Gill, and the multiple examples of pro-Russian speeches by Farage, and apparent Russian funding of Brexit campaign, and the funding of Reform by murky right wing US billionaires , and Johnson’s secret meetings with Russian oligarchs while PM – seems to amount to treason. Treason would mean Reform should be banned?
Is it conspiracy theory to think the ridiculous blanket coverage of the ‘China non spy trial’ is a convenient diversion ?
Dear Richard,
Re the black holes of despair
I don’t understand.
You have named all the issues that need to be addressed
we can all see them .
we all know there there.
Why can’t she?
It does not suit her personal agenda