Think times are tough now? Just wait til Labour’s ‘unexploded bomb’ detonates & causes REAL pain
SO, after all the days of spin and expectation management, what is the verdict on the Chancellor’s Spring Statement?
Well, despite Rachel Reeves promising stability, yesterday she admitted the financial headroom (or rainy day fund) she had so carefully set aside in October had already been gobbled up.
Only a £5billion raid on welfare expenditure and a slashing of general government spending has topped it back up to its wafer-thin level of £9.9billion, at a time of huge instability.
The tax burden has hit a record high and economists are betting Reeves will have to come back for still more in the autumn.
And, despite the Chancellor’s number one mission being growth, the budget watchdog reckons the economy will this year grow at just HALF the rate it predicted.
Yesterday Reeves was quick to once again blame the “changing world”.
What she really means is Donald Trump has kicked all of Europe up the backside to find billions more in defence cash.
Meanwhile, the US President’s habit of developing trade policy via social media could easily blow up her remaining best-laid plans in a matter of days.
The Office for Budget Responsibility (OBR) reckons a global tariff could wipe one per cent off the UK economy and also eradicate Reeves’ financial buffer.
Everyone has a plan until tariffs punch them in the face, to paraphrase another pugnacious character.
But, despite all these wild uncertainties, Labour would like us to gaze with rose- tinted glasses into the future where growth will be higher than expected.
Even then, the 1.8 per cent predicted for later in the current parliament is not enough to get the champagne out for.
This brighter outlook is largely down to Labour’s housing reforms and ripping up of red tape, which the OBR reckons will add 0.2 per cent to growth, or around £6.8billion.
But that relies massively on the Government coming good on its mission to build 1.5million homes.
It is an optimistic view, to put it mildly, to think it will be possible to ramp up housebuilding in four years to a level not seen in five decades.
Meanwhile, for businesses including our construction sites, builders’ merchants, brickies, sparkies and plumbers that this housebuilding boom relies on, the Chancellor has made it a lot tougher.
Why? Because, while Reeves thanked Angela Rayner, sitting beside her in the Commons, for the boost from the housing reforms, it is the Deputy Prime Minister and her union friends who threaten to blast the UK’s finances to smithereens.
Reeves was quick to once again blame the ‘changing world’
This is meant to be a government “on the side of working people”, but yesterday’s Spring Statement signals once again that Labour has forgotten working people need to have a job to go to.
The OBR yesterday warned that there could be even more pain to come from Labour’s looming Employment Rights Bill.
Spring Statement - key points
KEY announcements from the Spring Statement:
- No new tax rises: The Chancellor ruled out further tax hikes and pledged to crack down on tax avoidance, aiming to raise an extra £1bn.
- Growth downgraded for 2025: The OBR halved its GDP growth forecast for next year from 2% to just 1%.
- Growth boost from planning reforms: New housing policies expected to raise GDP by 0.6 per cent over the next decade.
- House building surge: 1.3 million homes expected over five years, with construction hitting a 40-year high.
- £2.2bn extra for defence: Additional funding confirmed to help meet the 2.5 per cent of GDP defence target.
- £400m Defence Innovation Fund: Backing new tech like drones and AI for the front line.
- Welfare shake-up: Targeted employment support and welfare reform to reduce benefit spending.
- Civil service cuts: New voluntary exit schemes and AI tools to shrink Government.
Sharp whack
It warned that the regulation policies that “affect the flexibility of businesses and labour markets . . . will likely have material and probably net negative economic impacts on employment, prices and productivity”.
As it stands, the policies are still so vague they cannot be properly analysed.
Andrew Griffith, Shadow Business Secretary, was quick to highlight it as the “unexploded bomb” — and it is the one that bosses have their heads in their hands about.
Hiring and keeping staff has already become much more expensive for businesses following the £25billion National Insurance tax raid in October.
And firms were not given any concessions in the Spring Statement either, despite their pleading.
Labour still don’t seem to get it. Darren Jones, Chief Secretary to the Treasury, told our Never Mind The Ballots show that it was only “big business” moaning about NI hikes and a rise in the minimum wage.
Not only do his comments go against the “pro-business” batting of the eyelashes the Government did in the run-up to the election — they also ignore how major retailers are the biggest employers in the country.
It is also just wrong.
What is the Spring Statement?
By Ryan Sabey, Deputy Political Editor:
Rachel Reeves is delivering the Spring Statement – nearly fifty years after the first such “mini-Budget” was delivered.
The statement, which over the years has been delivered in both autumn and Spring, was started in 1976 at the end of the year.
The law changed in 1975 to ensure there were two economic forecasts every year as opposition MPs and the public could keep track of government plans.
Rachel Reeves has insisted there will only be one major fiscal event each year with a Budget planned for the autumn – so no tax hikes or reductions this year.
Her Labour predecessor Gordon Brown held the Budget in the the autumn and each autumn he would deliver a Pre-Budget Report giving an update on the state of the country’s finances.
Fast forward to 2010 and George Osborne, Chancellor until 2016, set up the Office for Budget Responsibility, to provide an independent forecast.
They were also there to dissect the state of the economy – producing five-year forecasts twice a year.
But the OBR weren’t asked for a forecast by short-lived Prime Minister Liz Truss in 2022 despite their mini-Budget containing an array of tax cuts causing a market meltdown.
Only micro-businesses, which are most likely to fail in the first three years, are to be spared the hikes.
Instead every other small and medium-sized firm, hospice, dentist and charity up and down the land is facing a sharp whack under the Budget.
To prove it, just minutes before the Chancellor took to her feet, one MP raised at Prime Minister’s Questions the prospect of his local hospice having to raid charitable donations to afford the care- givers’ higher costs.
All these businesses feel thoroughly bruised by the Budget and are now bracing for another beating from the Make Work Pay reforms.
And that is despite the bleating from Labour that it is “working with” business after endless roundtables and consultations galore.
Bosses told me this week they knew Make Work Pay was going to be a nightmare because the Government had leaked that it was dropping plans for a “right to switch off” — potentially making it unlawful to contact employees outside of working hours — except that was never a real consideration at all. It is entirely fake comfort.
The Employment Rights Bill might have been tolerable during the heady days of last summer.
But that was before Labour talked down the economy then blasted business in the Budget.
It was before there was the threat of a trade war and a rush to boost defence spending. Carrying on with it now would mean it would become a job and growth destroyer.
What does this Spring Statement mean for Rachel Reeves?
By Ryan Sabey, Deputy Political Editor
RACHEL Reeves is trying to shift any blame away from herself and the Labour government as it grapples with the sluggish economy.
The Chancellor is telling MPs that the “world had changed” meaning she has to take drastic action when it comes to spending and welfare.
The trouble for Ms Reeves and Sir Keir Starmer is that they put growth as their “number one” mission and that, to put it mildly, is stalling.
The independent watchdog say growth forecasts has halved for this year and the financial headroom wiped out – hence the savings to be made elsewhere.
But for Ms Reeves all this puts her in a very tight spot insisting she will stick to her iron clad rules – with her looking to find up to £15 billion of savings.
The Tories and commentators are aiming their fire over how she hasn’t helped herself as growth has fallen.
They point out that she was the person who decided to go on a £40 billion tax raid at October’s Budget – with £25 billion of it falling on the shoulders of business.
The upcoming Donald Trump-led tariff war ledcould easily throw the government off course again unless a limited trade deal can be struck.
Rachel Reeves will be pushing every leaver possible to get that over the line before it kicks in next week to give her some breathing space.
But we could be back at square one come the autumn with the Budget to balance the books – with speculation there could be tax rises and Whitehall departments scratching around for more savings.