Rachel Reeves has published her pre-budget pitch in The Guardian this morning.
In it, she claims that the economy has “strong foundations”, that interest rate cuts, trade deals and inward investment show Britain is “a beacon of stability”, and that Labour has already begun to turn things around. That, however, is just a polotical smokescreen for the actual messages in what she has to say.
First, she admits that UK productivity is weak and has been since the financial crisis. She blames austerity, Brexit and Covid, but insists we must not revisit the issue of EU membership. In other words, she recognises a significant cause of our problems and then refuses to do anything of much substance about it.
Second, she promises investment in hospitals, infrastructure, energy, defence and jobs and frames this as the route to growth, rejecting a return to austerity. That sounds optimistic, but there is a catch because, third, she insists this investment can and must occur within her fiscal rules. She wants to pay off the country's debt, keep a grip on the public finances, whilst preventing what she calls a Truss-style loss of market confidence. She says a progressive government cannot justify the current levels of debt interest, but entirely ignores the fact that action on this issue is very much under her control if only she had the courage to take action, which she has not.
Fourth, she sees closer (unspecified and so far unnegotiated) ties with the EU, planning reform, and new trade deals as the long-term decisions needed for recovery. I do not.
Reading this makes clear that, as far as Reeves is concerned:
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Private markets remain the judge of her policy. No one else matters.
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Debt remains a constraint, imposing limits on what Labour can do, when that is not true.
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Growth remains the measure of economic success, even though, as I have argued elsewhere this morning, that's a metric well beyond its use-by date.
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Government investment must justify itself to financial markets, not to the public interest.
Whilst Reeves' rhetoric rejects Conservative austerity, the reality is that her logic remains entirely familiar, and consistent with that approach: she insists that the state must earn permission to act by proving itself responsible to bondholders, which is precisely the logic that has always promoted austerity.
The real questions that need answering are very different from those that Reeves is asking herself. Most especially, what she has to answer is how, if investment is essential, but the government still thinks it must first pay off debt before it can invest, can the UK economy ever break free from decline? That unresolved contradiction is right at the heart of what Reeves is proposing. I will answer it in a series of posts I am now planning on the Budget I would be delivering this autumn. They will start soon.
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I wasn’t expecting anything different, but it is grim when it appears in black and white. I finally had a reply from my MP, having written about the upcoming budget. A long and reassuring piece which didn’t take on board anything I had asked or stated. Do MPs know anything about economics, or do they leave it all to the chancellor? I had pointed out that MPs should be aware of what can be done with a fiat currency and progressive taxation, without using the term MMT.
They learn to do as they’re told.
Nothing else matters to them once they have been browbeaten into submission.
The UK economy is currently flat lining.
Rachel’s economic nonsense will result in the UK dropping into a steep recession pretty quickly and even more economic misery for 90% of the UK population.
When the UK pulls out of the recession, if Rachel is still in office, she will see more “growth” compared with today.
Indeed, Reeves now actually saying something about the EU and (maybe) closer ties at the very least, shows the realisation that leaving the EU was a disaster.
Indeed, it is an area whilst agreeing with the broad points of the Larry Elliott interview, his deep hostility to the EU, and a gushing piece Larry wrote in the Guardian last year, saying last that Britain outside the EU is better off (I flagged it up on this blog at the time) remains difficult for me.
We, admittedly, walked around that one when we spoke yesterday.
Elliott’s position at the time and his denial of the damage that Brexit has done in so many ways, leaves me reluctant to take seriously anything else that he says.
Ah, so this is why Reeves has a new hair style – no longer able to hide behind whatever the previous one was called, hair tied back as if she’s cleaning the house, reading to get down to business. New improved Rachel from Banking Customer Services. No blubbing this time, she means business. We’re saved!!
Yeah right.
All I can say about your post is that it’s as sharp as a scalpel. You summed her up a treat.
She’s as much use as a pork pie at a Muslim wedding.
Fascism anyone?
She sounded like Chancy Gardener (Being There) : “growth will come in the spring” – “beacon of stability” – only capable of speaking in cliches.
Next year, with a bit of luck, with or without a new hairstyle, she will be gone – when LINO are wiped out in Scotland and Wales. What comes after is another matter.
My concern is that the UK is not really an independent country.
Regardless of who’s in power, government economic policies are dictated by or subject to veto by the City (i.e. Wall Street) while foreign and defence policies are dictated by or subject to veto by the US.
Very few major UK companies and brands are even British-owned any more; since Thatcher, the country has sold most of its valuable economic assets, private and public, to foreign interests, mainly American, with all the consequences that entails in terms of control over jobs, investment and production, diversion of profits overseas and influence in the halls of power. (See Angus Hanton’s Vassal State for details – 2025 paperback).
Oh, the irony!
https://www.taxresearch.org.uk/Blog/2025/10/27/the-demands-for-independence-are-growing-by-the-day/
I saw the article this morning, but could not bring myself to read it, so thanks for the summary. The only hopeful thoughts I can derive from it is that either she is lying or she will be sacked by the autumn. Neither thought fills me with much cheer.
A key question for me is, How do we shift economic decision making in our government from neoclassical to heterodox (Complexity etc.). How do we convince the likes of Reeves that the economic paradigms they use, do not work, and will not lead to a healthy society. Great work as always Richard.
Please send answers written on the back of a £20 note to my usual address….
I see it as being like Galileo trying to persuade people that the Earth goes round the Sun.
Most economists, the City, Treasury, MPs and indeed most of the public are convinced that the sun goes round the Earth.
But we have to keep trying. An economics professor friend argues that there is now a majority in the economics world who are more heterodox in their thinking but it seems that they dare not own up to it as it would be career damaging
Agreed
It is bl**dy frustrating when Richard and Steve Keen (and others before them) have been trying to show them all the garbage that is neoclassical economics! As Keen says the NC is more like a religious cult that never listens to any contradictions to their theory, even when one or more of their own members of the cult demonstrate with empirical data how wrong they are. In the true scientific community when the old professors die, the rebels take power and implement the new paradigm of thinking. In economics this doesn’t happen, when old profs die, the younger ones don’t change the paradigm! Frustrating indeed.
I fear the only way is a change of personnel.
The sad truth is that while you are 100% correct in your analysis, the people who need to accept it are paid to believe the version of monetary economics favoured by the City.
A change will inevitably come; we just need to keep repeating the truth and chipping away at the case made by those who deny it.
Housing for me is the number one issue. Yet this week there are questions of affordable housing constraints within London Burroughs???
Firstly I would stop the right to buy as the replacement costs are not financially viable.
Secondly, I would suggest a task force of competitors to deliver a program of replacing the council property that we have lost. That should also be paid by the state that, realised the fortune and not local council.
Thirdly, those properties should be built to last, outside of NHBC certification and probably the storm grade, of Australia some 30 years ago.
Fourthly, they are managed in house by local council and the repair and upkeep is not an investment for a shareholder.
So I guess what I’m saying is we need strong investment from government. Not the debacle of HS2, but ground up with regards to our future.
Sadly we haven’t seen a government that changes the economic spiel and we are left with this shit. Transferable government in the trickle down, extraction , neoliberal way. Sad face!
Ooh and whilst I’m here. .. Can we have repairable goods.
Please to the last
This piece includes a good story illustrating why cutting benefits to the poorest is stupid: https://www.instagram.com/reel/DQSaWYAEruX/?igsh=MXJ5Y2t0cmhweWt1MQ==
‘We’re all connected’. Although we might not realise it.
You say: ” the current levels of debt interest… is very much under her control”
Can you clarify? How can she control it if the BOE is independent and pays interest on reserves?
It’s not independent.
She can change the law.
It does what she wnats, anyway.
She has the powet to over-rule it.
And she is the shareholder and funder.
Shall we get real here?
I gave up paying her any attention a long time ago.
Our Labour Party response to Reeves:Full Budget Powers
Labour International calls on the Government to use its full range of powers and resources in setting out its Budget strategy. In particular, as in other moments of national crisis, it should make full use of credit creating capacities which derive from public ownership of the Bank of England, which issues and manages Britain’s sovereign currency.
The Bank of England can and must make credit available to fund whatever spending is included in a Budget passed by Parliament. That means that, contrary to what is often claimed, the capacity of Government to spend is not limited by tax receipts and those from the sale of Government bonds. Bank of England credits were utilised by recent Governments in response to COVID and the Financial Crash, and they should now be called on again.
Calling on such credits need not disrupt financial markets and would enable Government to spend on the scale necessary to restore the damage to essential infrastructure inflicted by years of Tory austerity. The size of that hole in the real economy is measured in trillions, and will continue to produce ‘black holes’ in public finances until the damage to our productive resources is repaired.
Social and environmental damage, key output and skills shortages underline how public spending in education, health, water, energy, community and transport infrastructure is essential throughout the country to life quality and business viability. The real constraints on spending concern how far it can actually increase productive capacity rather than just competing for scarce resources. Government owns the Bank and need to think about spending across the board as investment.
This dynamic perspective, rather than the pursuit of a chimerical balancing of the books at any given moment in time, should be the focus of Budget strategy and Government’s communication with the public.
Thanks