Rachel Reeves is presenting a budget built on assumptions that simply cannot survive the world we are about to enter. Share prices are likely to fall sharply. A banking crisis may follow. Pension funds could be hit harder than at any time since 2008.
And the Chancellor? She has offered only cuts, caution and neoliberal wishful thinking.
In this video, I explain why her budget is unravelling before she even delivers it — and why government action, not austerity, will be the only way out of the crisis that is coming.
This is the audio version:
This is the transcript:
Rachel Reeves's budget is unravelling in plain sight.
I'm not just talking about the fact that almost all the ideas that she has thrown out so far have very clearly failed to attract any form of support. Her own MPs, the financial press, people, interest groups, all of them have said whatever she has proposed makes no sense at all. And in almost every case, they're right because she's done absolutely everything except talk about taxing the wealthy more.
But I'm not talking about that issue at all in this video. I'm talking about the fact that a budget is based upon a set of assumptions; assumptions about how the world will be and how it will be managed. And my suggestion is that, as we face an imminent financial crisis, every one of the assumptions that she has put in place will probably fail within weeks at most, and months at the latest.
I well recall commenting on a budget on BBC Radio Two in March 2020. I was, as usual, with Jeremy Vine and Mark Littlewood, who was then the director of the Institute of Economic Affairs. And Mark and I agree on almost nothing, although at a personal level, we do seem to get on, so long as he puts up with me calling him Comrade. But the point is, we came out of the studio and Mark said to me, "We'll be back here very soon because this isn't going to work."
We both knew that COVID was happening. I, in fact, got my first dose of COVID probably that day, probably in that studio. And we were right. We were back very soon. We agreed on the point. We agreed that there was going to be a crisis coming that was going to require a new budget, and that's exactly what happened.
Over the following months, there were numerous announcements, and we were back on air discussing them as they happened in real time. And I think that's going to happen again, because whatever Rachel Reeves says now is not going to assume that the world's financial markets are going to collapse.
As I've said in other videos this week, it's likely that share prices could fall by as much as 40% as the AI tech companies see their share prices collapse in the US, and drag everyone else behind them.
It's likely as a consequence that we will have a banking crisis because the companies in question have borrowed vast amounts of money, not just from banks, but people have borrowed from banks to buy shares in those companies, and the consequence will be that the banks will have a crisis as well.
And the world's pension companies will look absolutely distraught when they face the reality of how much money they will have lost because they have been lending money to these companies as if cash was going out of fashion, which it shouldn't have been.
And so Rachel Reeves is going to be looking very soon at a world so unlike the one that her assumptions suggest will exist, that nothing that she says next Wednesday is going to have any relevance whatsoever. Just as Rishi Sunak's first budget in March 2020 turned out to be utter nonsense because it bore no relationship to the economy that developed over the coming weeks and months, that is likely to be true for Rachel Reeves as well.
She's facing the sort of crisis that no one since Rishi Sunak has. And in fact, the sort of crisis that no one, since Alistair Darling, guided perhaps by Gordon Brown, who was then Prime Minister with Alistair Darling as Chancellor, has faced since 2008.
We are in for a meltdown, and let's not pretend otherwise. And the job of government in this situation is to do something which is completely alien to everything that Rachel Reeves thinks: to step in and help. She's never considered the possibility that that is what government is about.
She bought the Kool-Aid served by George Osborne in 2010 when he said austerity is the new game in town, and has never presumed otherwise.
She's neoliberal to her core.
She thinks a small state is essential.
She believes that people should stand on their own two feet, and it's not her job to help them, and she's wrong.
She's wrong about all of that.
In the event of a crisis on the scale that we're talking about, the only agent capable of keeping the economy going is the government. The government can create the money that's needed.
It doesn't need to use quantitative easing to do that. It could just simply borrow the money from the Bank of England and not play with the bond markets as a consequence, which has been so disastrous since 2008.
The government will need to step in and support those who will lose their jobs.
The government will need to step in and save the banks because we did not do what I asked the government to do in 2008, which was to create a viable bank payment platform which would survive the failure of any individual bank, so we'll have to bail them out and all their poor decision-making yet again at enormous cost.
We will have to look at how pensions are funded in the future because this time the hit to the pension funds is going to be so big that for many people who are entirely dependent upon their savings and not on a guaranteed pension for their financial well-being in old age will be so great that there will be many who will be asking the question, will they ever be able to retire?
We will have to look at how, and in what way we organise work, and for whom, because there will be knock-on effects of this crisis for small businesses that will be difficult for many to manage when some have only just got over the COVID crisis in itself.
There will be households that will be stressed beyond limit.
And all of those things will have to be managed by a Chancellor who, at present, has shown absolutely no imagination of any sort whatsoever when it comes to managing the economy.
Rachel Reeves only knows how to cut. That is her modus operandi. It's the modus operandi of the small company accountant; I've met many of them in my career. And when they're asked to answer a business question about how to improve profitability, they don't think about how can we improve services? How can we be more effective in our financing? How can we use our balance sheet to achieve an outcome which we hadn't previously imagined? How can we work within the constraints of the economy to put resources to best use? They just say, cut the advertising budget, and that's the equivalent of what Rachel Reeves does. She can only think that way.
She is at best a good accountant, but she's not an economist, let alone a political economist up to the task at this moment of managing a crisis economy, unless she has strengths and depths that we've never seen before, which is a possibility; I have to leave that one open and on the table. But I have my doubts, and I think you have too.
So in that case, her budget is going to unravel. That's my key point. This budget will deliver nothing which will have any relevance to our future because our future isn't the one that she's imagining in the assumptions that underpin this, which is that everything is going to be just fine in two or three years' time, because that's what every neoliberal budget presumes, because neoliberal economics assumes that everything returns to what it calls the mean, and the mean means that - and there are too many means floating around here - the mean means that everything goes back to normal, which is the halcyon view of the way in which the economy runs which those neoliberal economists have, where the wealthy continue to get wealthier and everybody else just drags along behind, but that will not happen this time.
It can't, because the wealthy aren't going to be nearly as wealthy as they were. They're going to be screaming and hollering and shouting about the bailout of their cryptocurrencies, and their banks, and their finance entities, and the City of London, and their businesses, and the rest of us are also going to be petrified about how we maintain our financial well-being.
Without vision, without courage, without care - and I emphasise the last word in particular - we will not solve this crisis. Rachel Reeves is not anticipating that, and that is a massive failure on her part.
She should at least recognise that there's a possibility that she will need to have the capacity to deal with this crisis when she speaks to the House of Commons next Wednesday. I very much doubt she will. And that's why everything that she says is going to unravel, and we will be back here again soon, talking about what will be needed to address the real world that we are about to face.
What do you think? Do you think a crisis is coming? Do you think Rachel Reeves is the person to manage that crisis? Do you think she's able to manage that crisis? And do you think you'll survive it? Let us know. There's a poll down below.
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One of the cornerstones of privatisation has been the use of Private Finance Initiatives to fund schools and hospitals.
They are billed as efficient and cost effective… Except when we are left to pick up the pieces:
“School repairs left unfinished as firm behind huge PFI contract goes into liquidation” (21 Nov 2025)
https://www.bbc.co.uk/news/articles/c5y0yrl111qo
What did the Chancellor say in 2008?
https://www.gov.uk/government/publications/budget-2008-stability-and-opportunity-building
“The Government reports that the economy is stable and resilient, and continuing to grow, and that its strict fiscal rules are being met.”
Myopic.
🙂
And as Steve Keen has reminded his readers on numerous occasions recently, remember what Bernanke said just a few days before the GFC started in the USA, he said all was well with the economy, it was back to equilibrium! What a stupid error because as ever the neoclassical economists were only looking at government debt and ignoring private debt. And the same thing is happening again – I’m furious because as a pensioner I’ll be impacted by this stupidity.
All correct
“shown absolutely no imagination of any sort whatsoever when it comes to managing the economy”
At the risk of repeating myself: she was not selected to show “imagination” – she was selected on the ability to follow orders aka “a safe pair of hands”.
Most chancellors in my lifetime have either followed orders/safe pair of hands or have been programmed to the point where they are on auto-pilot in terms of meeting the needs of the City of London. Brown was the latter (programmed wrt “off-balance-sheet-accounting” as applied to gov’ finances), Osborne & all the rest – safe pair of hands/follow orders. They are not there to make the UK a better place for UK serfs/peasants, they are there to keep the City of London show on the road. This is the reality. When (not if) Reeves is turfed out she will be replaced by an identical person (politics is packed with “safe pairs of hands”). Deform get’s in? Same – perhaps worse. The UK is in a doom-loop with respect to the political economy & it is difficut to see how it will break-out short of a revolution.
Play the game! The Guardian’s interactive budget game.
I maxxed Higher Rate Income Tax and introduced a gambling tax, closed capital gains tax loopholes and taxed bank profits. Result: £25bn surplus and green lights from Markets & Polls. Now where’s my freebie swag?
https://www.theguardian.com/politics/ng-interactive/2025/nov/20/you-be-the-chancellor-play-our-interactive-budget-game
It’s a shit model. And that’s a technical term.
I dislike these games/models, it’s worse than Sim City. As a kid I always thought “where is the money coming from? My citizens don’t just magically have money…”
I would love to make a MMT mod for a city simulator like City Skylines that models what we know about fiat currency. Maybe this would help people imagine more possibilities with the economy…
Good luck
Agreed – I think that Reeves and her boss are out of their depth.
But also, ‘the same old same old’ Neo-liberal bull’ does not help either.
Every time there is a privatisation or a private sector method applied to the public sector there seems to be an inflationary effect as exploitation takes hold, where once there was just a system of co-operation, now there is a cost centre where money can be charged or levied.
And Labour – they just don’t get it because all that is happening is that market thinking is creeping into places that it shouldn’t in order to be the driver of growth (apparently!!). So the only way we to get growth is to allow rampant profiteering of what remains of the public sector – and these are viewed as ‘market innovations’. It’s not innovation – it’s cannibalism.
This is because they cannot bring themselves to make real investment decisions with government money – infrastructures continue to whither and new infrastructures needed to cope with the climate emergency will not be born.
This is what makes Reeves and Stymied so gutless but also – and it is not a strong word at all in their case – depraved.
Yes that is what Reeves and the First Lord of the Treasury are – depraved.
Our weak’n’wobbly PM is preparing for the Budget crisis in his favourite way. He’s off to another overseas photo-opportunity at the G20, with other weak’n’wobbly clapped-out technocrat leaders, on the world stage, such as France’s Macron (government & PM about to be replaced), and Germany’s Chancellor Merz (government also looking very wobbly) – to maximise our “trade opportunities”.
Rachel would seem to be on her own. Maybe Wes (where did all my nurses go?) Streeting, or Shabana (I deported them all) Mahmood, can help out on the morning media round and express their “full confidence” in Starmer and Reeves.
Or maybe Polly Toynbee will have to be wheeled out again?
“Without a vision, the people perish.” (Proverbs 29.18)
I wanted to say RR needs to rethink, but is she capable of doing that? She needs to go – now, before she can do any more damage.
Rachel wrote a FB post the other day claiming her budget would 1. help with the cost of living 2. pay down the “national debt” 3. bring down NHS waiting lists. It’ll do none of that… pretty confident on that! Paying down the national debt aka shrinking the money supply?
Very obviously the UK lives in a right-wing fantasy world until push comes to shove.
Right-wing politicians like Reeves tell us government operates on a credit card refusing to acknowledge that the government is in a position to create liability free money to help optimise the economy.
That is until the economy starts to exhibit signs of financial collapse like the 2008 GFC when suddenly there’s bailout money galore flowing from government coffers so to speak!
Thoughts that the sudden creation of all this liability free money will trigger hyper-inflation have flown out of the window. Of course as we saw in the aftermath of the GFC much of this money if not all can be recouped by government just as too much liability free money for optimising the economy can be withdrawn particularly through taxation and rescheduling government spending where possible.
So if there is another financial crash I’m sure we’ll go through the same two-step process of government liability free money being created from nothing for a bailout followed by government recouping some of that creation.
What won’t be learnt or applied is the pragmatic lesson that if you can create this particularly type of debt free money for an emergency you can do it in “normal” times to optimise the economy for the benefit of the many and particularly those in poverty for reasons beyond their control.
https://mitsloan.mit.edu/ideas-made-to-matter/heres-how-much-2008-bailouts-really-cost
https://www.federalreservehistory.org/essays/banking-panics-of-the-gilded-age
https://www.federalreservehistory.org/essays/panic-of-1907
Prior to the creation of the Federal Reserve central bank nationwide panics occurred on average every fifteen years in the United States!
https://www.federalreservehistory.org/essays/jekyll-island-conference
Reeves says there’s a lot of mansplaining how to be Chancellor going on and she’s not letting it get to her.
Her mother showed her how to balance a household budget.
She knows best – so there!
I despair
How did her mum balance the household clothing budget? (Freebies from donors?)
🙂
She now calls it charity
She baked potato peel pie.
Ther’s a good film there….
Speaking of AI troubles – the darling of the AI world, well it’s main supplier, Nvidia went from a share price of $186 @ 4pm Wed to $196 @ 7.30pm Wed then back to $183 @ 12.30pm Thu – basically an increase of $450bn in “value” reversed in less than 24 hours.
🙂
I suggest there’s a missing actor in this tragedy – Starmer.
I agree that Reeves is useless, and frankly needs to go now, even at this late stage, but Starmer is there as the Overseer. He needs to wake up and read the runes, it’s not difficult. I wonder just how paralysed the whole HMG organisation will be under the likely mantra “There’s no money, we can’t even buy a ball of string, we’ve no money”?
I just hope the rest of the Labour Party have the willingness/imagination to remove both of them, send them to the Chiltern Hundreds, and do it in the middle of the unfolding crisis.
You are correct that Reeves should be making us better able to deal with the upcoming crises – but in her worldview, that’s exactly what she’s doing. Last month she said “we are looking, of course, at tax and spending to ensure that we both have resilience against future shocks by ensuring we’ve got sufficient headroom, and also just ensuring that those fiscal rules are adhered to”. Earlier this month she said she would make her decisions on tax and spend to “build more resilient public finances – with the headroom to withstand global turbulence”.
We saw the same thing with David Cameron. The enormous cuts to the health service as part of austerity left us in a much worse position when the ongoing pandemic first hit in 2020, but according to Cameron the opposite was true – thanks to him and Osborne sorting out the public finances we were much better able to deal with the pandemic. In this upside down worldview cutting money to the NHS left us in a better position to deal with the pandemic. This is the same view that Reeves now has.
Also, you previously advocated for Green QE but are now saying QE has been disastrous. Is it just the implementation of QE that you don’t like, or is it the principle? Have you completely gone off the use of QE even for good things like Green QE, and if so what changed your mind?
I advocated Green QE before I fully undertsood MMT or had even heard of it.
Government money creation uaually achieves the goal better. BUT some elements remain in my thinking on saving: see yesterday’s Budget post.
The problem with Rachel Reeves is that she’s never understood like most people that it’s essential for the state to be able to create money debt free to enable a nation deal with the problems it encounters.
Sorry to be gloomy, but a moment of real danger is emerging tonight. The proposed Ukraine–Russia settlement, with its territorial concessions, weakened guarantees and minimal consultation with European partners, signals a fracture in the Western alliance. If this shift proceeds unchecked, the security, economic and diplomatic foundations on which Europe has relied for decades will begin to unravel. At the same time, as you have been warning, Western economies already face deep structural strain, leaving little resilience to absorb further shocks. Unless governments act with clarity, unity and urgency, we will soon be entering a period of instability in which long-standing assumptions about defence, trade and democratic governance no longer hold. Brace, brace, brace.
This is not being agreed by anyone, Russia included.
Just to clarify: I’m not suggesting that any deal has been agreed, only that the way these proposals are being floated is itself revealing and deeply concerning. The apparent lack of consultation with European partners, the scale of concessions under discussion, and the signals about reduced US engagement in European security all point to a fundamental shift in how the US is approaching the alliance. Even if nothing comes of the proposals, the process suggests a strategic divergence within the Western bloc that feels extremely significant in its own right. I hope I’m wrong. I really do. But I think we’ve reached an historic turning point.
Accepted
But does anyone relly take Trump seriously? Even the news no longer does so.
Not taking Trump seriously is clearly rational, but it’s also part of the problem with this.
Hints about reducing U.S. forces in Poland or reevaluating America’s presence in Europe are strategically enormous.
No president can signal those possibilities without involving the Pentagon, senior defence planners, foreign policy advisers, and congressional interlocutors.
If these ideas are even being discussed inside the administration, they reflect a deep policy shift, not a passing flourish.
The initiative shows structured planning, multi-agency involvement, an ideological shift away from alliance-based security, and a new U.S. posture that treats European security as negotiable.
These are markers of an emerging strategic realignment, not a personal outburst.