Reeves is gaslighting the public with her £50bn fiddle

Yahoo

02-04-2025

Last week, the Chancellor tried to use the Spring Statement to burnish her more hawkish credentials and reassure the public and the markets that she was in control of the public finances.
She told the House of Commons that she would 'never take risks with the public finances and would never do anything to put household finances in danger'. If meeting the 'non-negotiable' fiscal rules required £15bn of welfare and spending cuts, then so be it.
In the Chancellor's mind, the anger within her own party caused by these cuts – in particular to cuts in disability and health related benefits – are just a political problem to be handled in order to achieve the bigger strategic prize of restoring order to the public finances.
She justified such an approach in the face of an increasingly outraged Parliamentary Labour Party by arguing: 'The responsible choice is to reduce our levels of debt and borrowing in the years ahead, so that we can spend more on the priorities of working people, and that is exactly what this Government will do.'
The big problem with this statement is that it isn't true.
The Spring Statement increased debt and borrowing compared to the plans published in the Budget last year. Reducing debt and borrowing from those incredibly high levels is exactly what the Government should be doing to guard against the changing world we keep hearing so much about.
Yet it is precisely the opposite of what they are doing.
The Office for Budget Responsibility (OBR) could not be clearer when they say 'borrowing is projected to be £3.5bn higher and debt 0.6pc of GDP higher at the end of the decade than in our October forecast'. You read that right, higher.
In fact, borrowing is going up by nearly £50bn over the next five years.
I am not sure how to describe a political and economic strategy that leaves your own side attacking you for not increasing borrowing when, in fact, you have done just that to the tune of £50bn. But this sort of thing happens when you repeatedly say one thing and in fact are doing something completely different. And the Spring Statement was full of such sophistry.
As mentioned above, the Chancellor pledged to restore stability to the public finances yet within five months of massively increasing spending had to announce it wouldn't be going up by quite so much.
She claimed that 'this statement does not contain any further tax increases' despite it containing £200m of council tax rises and £500m of visa charge increases.
She promised to work with the Bank of England to reduce inflation shortly before announcing that it was in fact now forecast to be 0.6 percentage points higher this year than previously thought.
And she heralded cuts to interest rates when the OBR assumes they will now be 0.25 percentage points higher than in October.
Time and time again the Chancellor said one thing but the data said something else.
To tell so many half-truths in one half-an-hour speech, the worst of which was the claim to be cutting debt and borrowing when you had just increased both, is not just potentially misleading the House of Commons, it is gaslighting the British people.
Readers may well think that is simply what politicians do. But I think this goes to the heart of the debate that is now raging with regards to the Government's economic agenda.
Since the Spring Statement, everyone has been picking over the details of the cuts or arguing about the OBR and the fiscal rules. And that's understandable because of the way the Chancellor framed the event.
She positioned herself as a fiscal hawk determined to press ahead with spending cuts in order to 'restore stability'. But this is missing the bigger picture.
This Government has overseen a massive increase in the size of the state. It has increased, and is increasing, public spending, to unsustainable levels.
In order to do so it has taxed the growth generating private sector into the ground and ramped up borrowing which has caused inflation and interest rates to stay higher for longer – punishing households and businesses alike.
The fiscal rules are just the means chosen by the Chancellor to enable this agenda. The OBR merely the judge as to how she is doing against these rules. And a small-scale slowing down of the rise in welfare spending, a drop in the fiscal ocean.
It is the overall levels of tax, spending and borrowing that ought to be the real target of Labour MPs' and everyone else's anger. Because we are paying the price for the Government's gamble that increasing spending would drive growth but not inflation. And this gamble has failed.
The Government overreached itself in the autumn Budget. And regrettably shows no signs of changing course. And to make matters worse it looks like they are going to continue to pretend that up is down, and down is up.
Adam Smith is former chief of staff to Jeremy Hunt
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