What will Rachel Reeves do today?
I have been reading about, listening to, and then watching budgets since the 1970s, and for all practical purposes, today is yet another in the long history of fiscal events to which I have given attention over nearly 50 years.
These occasions are very different now from what they were that long ago. Then we waited with anticipation and little idea about what might be said. Now, a great deal of what will be announced at the Despatch Box has already been well and truly leaked, most especially by the person who is going to actually make the statement. The sense of occasion is somewhat diminished as a consequence.
And yet, at the same time, the jeopardy has increased. What is almost invariably true now is that what comes out on the day of a Chancellor's statement is the news that is so bad it could not be leaked in advance, plus one supposed sweetener.
What is clear from the prior announcements this time is that the bad news is really bad. The Office for Budget Responsibility will, almost certainly, cut its growth forecast for the current year, whilst increasing its inflation forecast (despite today's fall). Neither will be by much, but those changes will set the mood, making the claim that Rachel Reeves will, inevitably, reiterate that Labour will deliver its policy promises on the basis of a booming economy look even more incredible than they always have. That Andrew Bailey of the Bank of England did, quite unhelpfully for Reeves, also make clear that there is not much chance of growth to be found in the UK economy in the years ahead just a day or two ago, ensures that any sense of optimism that Reeves will try to project during her speech will almost certainly be shattered by the time she and other ministers reach the media studios later in the day or tomorrow morning.
We also know that there will be austerity, which is technically defined as any policy created by a government with the primary goal of assisting it to constrain its debt. Given that is the whole purpose of her supposed fiscal rule, of course, she will deliver austerity today. That is all she will be talking about. Everything else is a footnote.
In this context, it is important that austerity can be represented by tax increases. It is not just about cuts to spending. We do, however, know that there are not going to be any tax increases, even though the majority of people in the UK think that the wealthy in this country are undertaxed, which is a matter of fact, they are in proportion to the rest of the population. Nothing that will happen today will, however, correct the fundamental policy error that Labour has made to not increase any taxes on wealth, which decision by Rachel Reeves represents Labour having chosen to shoot themselves in the foot if they think it is necessary as a consequence, as they obviously do, that this then requires cuts to government services.
We already know that there will be £5 billion in cuts for social security claimants. Most of these will callously fall on people with disabilities, for whom the reductions in payments owing may have a profound impact on their well-being. Rumour has it that the total value of social security cuts may increase today.
We also know that there are to be cuts to the civil service, with 10,000 posts to go, although for what reason it is not clear because that has not actually been explained. This is a policy put in place by Reeves' headless heart, with the heart in question being motivated by a visceral hatred of those who work for the government that Reeves was herself so desperate to be a part of.
These cuts will not, however, balance Reeves' spreadsheet, and so there are going to be significant cuts to the budgets of many unprotected departmental budgets within government, and some of these will be significant. To appease Trump and Reform, expect yet more attacks on environmental programmes and anything to do with aid. Beyond that, what further absurd cuts Reeves will come up with is anyone's guess, but we can be sure it will happen. Only defence will see an increase, and it will be small; the equivalent of the cost of creating Dad's Army.
What will be the consequence of this? What will become apparent is that this is a government that is preparing to pull the shutters down early. It does not think that there is sufficient economic activity within the economy to support its own sustainability and is, therefore, limiting its operations as a result. The one thing that we can be sure of is that this will be the message that will be heard in the wider world, and as a consequence, we are likely to be heading for recession. Any government that refuses to support its own economy at a time when it is under stress does, as this one is doing, inevitably sends out such signals, and Reeves has clearly not learned that this is the case.
In that case, nothing she says will resonate as strongly as the fact that she is not willing to spend to support her conviction that growth will happen. It will not happen as a result. It will be as straightforward as that. The ‘animal spirits', as Lord Keynes described them, will be suppressed, and so will the mood of the economy be. Austerity always leads to lower economic growth. That is what Rachel Reeves is choosing. In that case, her rhetoric will ring hollow today, and that is so politically inept I do not rate her chances of having many more goes at making such statements. A Chancellor who cannot deliver confidence is a liability to any government, and that is what she is.
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Gawd help us. Governments just get more and more inept. We seem to have total capture by ‘big money’. If we don’t change course there will be a revolution.
Worth a read
https://x.com/NoJusticeMTG/status/1904595287177384373/photo/1
Now on the blog.
Thanks
I doubt that Starmer understands economics (it does raise the question – did he ever bother to inform himself? or is a blank slate – as portrayed in “Get In” easier to manipulate and control? like the DLR (Docklands Light Railway) to which he was compared). Given he is, supposedly “the boss” ist begs the question: what passes between PM and finance minister? What role McSweeney the unelected Irishman guding the good-ship LINO (as the DLR’s chief of staff) & by extension the UK on political matters. Missing: forensic questioning of Freebie-Reeves by the Uk media.
Who actually runs the UK? It ain’t Starmer (he’s run by McSeeeney), it ain’t Freebie-R (strings pulled by finance ministry) – who?
One thing for sure, the god Moloch continues to be worshipped in the Uk and today’s sacrifice will be the disabled – chucked into the flames by F-R. (or whoever controls her).
What a miserable place the UK is. I feel sorry for young people, the disabled, the elderly, indeed, anyone who’s not ultra wealthy – there’s nothing but a diet of austerity, stagnation, misery and worry. It’s never ending.
Yet Labour are so content with themselves. They think they’re doing ok, that nobody could do any better.
HELLO LINO – THIS IS A BIN FIRE.
“Austerity always leads to lower economic growth.” That might not be a bad idea if it means living within planetary constraints and focusing on those important things in life that do not form part of GDP. There was an excellent RFK speech on this once.
I think the definition of austerity does need tightening up so that the claim can be tested if it is a serious one – Reeves after all has said that her primary goal is growth so within that context anything she declares today won’t be austerity.
In truth the size and mix of government spending as well as the degree of liberalisation in planning are key elements of whether growth occurs and reductivism to a single pejorative word doesn’t describe what’s happening well at all.
Basic answer to the question: Something bloody stupid. As usual.
It must be clear to every ordinary citizen that cuts to many areas of government spending mean not only poorer public services (less effective, less extensive) but also greater costs to most people (things we used to rely on but find we have to pay for now) and, importantly, greater costs to other areas of government expenditure (less tax income, more people requiring various forms of help, and big costs of infrastructure that is failing because too little has been spent on routine maintenance).
How can our politicians not see this? And if they do see it but choose to ignore it, why? What do they think is going to happen?
Their position is explained by a complete lack of understanding of the macroeconomy. They never got beyond micro.
I get the feeling that Reeves (and all recent chancellors), only really care what Paul Johnson has to say about their budgets/statements. Just as long as the IFS says their plans just about balance the books in the shorter-term, they are more than happy.
Has the government produced any impact assessments about their benefits cuts? If not, why? It would seem to be a good idea to have some sort of a clue what your policies are likely to do to those who are losing even more money?
Her big problem was accepting Union pressure on massive public sector wage increases most notably for train drivers. Fair enough your point is you can print to pay for this and pretty much anything else including welfare benefits and defence. Not sure o believe this. Fair enough we are not at full employment but those out of work does have the skills or sometimes the desire to to fulfill the roles the economy needs. That is a separate discussion.
Train drivers are not, in most cases public sector employees. Getting basic facts right really does help.
I was watching bbc breakfast news this morning and they were asking lecturers and students at Sheffield University about the Spring Statement. A senior economics lecturer was commending Rachel Reeves financial rules in order to support financial stability. So it appears there are people in academia who do support her self imposed financial rules (even though they are completely unnecessary) and are presumably relaying this message to their students. Any thoughts?
That is Michael Jacobs, I suspect – a long time New Labour hack, and not respected for it
She will spray Neo-liberal vomit all over the status of the the Chancellor of the Exchequer. She will demean the post further.
The cynic in me says it’s going to be a good time to invest in the big outsourcing firms. We’ll cycle through the ‘fire everyone, everything stops working, hire consultants at five times the day rate, panic and rehire permanent staff’ pattern (this has been described by various friends and family members who work in the NHS and civil service).