0:00
the chancellor insists that it wasn't a
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budget but I bet she wishes that it was
0:04
At least then she might actually have
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been able to do something more than
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simply take us back to square one
0:09
Welcome to the week in business with me
0:14
May So there you have it the spring
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statement How was it for you the
0:19
chancellor had promised there would be
0:20
no fireworks and in a way she delivered
0:22
on that pledge No new taxes no fresh
0:24
borrowing binge and some modest cuts to
0:26
public spending the details of which had
0:28
already been released So what did we
0:29
learn what did the chancellor actually
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do and has Donald Trump just torpedoed
0:34
what little chance she ever had of
0:35
growing the UK economy let's start with
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yesterday's statement And constrained by
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her fiscal rules and her own insistence
0:42
that it would not constitute a major
0:44
event Rachel Reeves was left shuffling
0:46
the few cards she held in search of a
0:48
better hand And that search was in vain
0:51
Despite deploying the kind of rhetoric
0:52
normally associated with a full fat
0:55
fiscal event by the time the chancellor
0:57
sat down it was hard to see what had
0:58
changed It's true that relatively modest
1:01
policy changes such as a few billion
1:02
shaved off of welfare budget that's
1:04
expected to reach 70 billion by 2030
1:07
will have political ramifications for
1:09
Labor And it's also true that the
1:10
government does appear to be moving the
1:12
dial on house building contributing to
1:14
future growth But when it comes to the
1:16
bigger picture just consider a few
1:19
sobering facts Public spending as a
1:21
percentage of GDP will still be higher
1:23
in the years ahead than at any time
1:24
since 2010 having been on a downward
1:27
trajectory until the pandemic hit And
1:29
the OBR made clear yesterday that public
1:31
sector net borrowing will still be about
1:33
8 billion quid higher on average over
1:35
the next 5 years than was forecast last
1:37
autumn And public sector net debt will
1:39
also come in around 30 billion quid
1:41
higher than was expected due to
1:43
additional borrowing The fiscal watchdog
1:45
also said that growth in output between
1:47
2023 and 2029 will now be half a
1:50
percentage point lower than in October's
1:53
forecast and the level of trend
1:55
productivity will be more than 1% lower
1:58
by the end of that period Economic
2:00
growth will also be a pathetic 1% this
2:03
year and is not forecast to hit even 2%
2:06
ahead of the end of this decade So
2:08
that's the backdrop against which the
2:10
chancellor made considerable effort to
2:12
reinstate a modest 10 billion pounds of
2:15
fiscal headroom which had been wiped out
2:17
by low growth and higher borrowing costs
2:19
since last October She has put us back
2:22
to square one And if 10 billion pound
2:25
wasn't enough room 6 months ago it's
2:26
unlikely to prove sufficient for the
2:28
next 6 months either Indeed the OBR says
2:31
that given the state of our domestic
2:32
economy and global uncertainty it won't
2:34
take much to turn that surplus into a
2:36
deficit And how would Rachel Ree
2:39
maneuver herself back within her fiscal
2:41
rules the smart money is on tax rises in
2:44
this autumn's budget Something the
2:45
chancellor refused to rule out yesterday
2:48
Economists at the Institute for Fiscal
2:50
Studies said that policy decisions made
2:52
by Reeves at the spring statement have
2:54
now created more uncertainty Their
2:56
director Paul Johnson is clear He says
2:59
"We can now surely expect six or seven
3:01
months of speculation about what taxes
3:04
might or might not be increased in the
3:05
autumn." and he adds there is a cost
3:08
both economic and political to that
3:10
uncertainty The government will suffer
3:12
the political cost and we will suffer
3:14
the economic cost The OBR was explicit
3:17
Given the sensitivity of the UK economy
3:19
to what happens in America and the EU we
3:21
are on a tight rope and any fresh
3:24
headwinds could blow us off wiping out
3:26
that wafer thin fiscal headroom that the
3:28
chancellor so carefully restored
3:30
yesterday and forcing her to either
3:32
borrow more or raise taxes in the autumn
3:35
And those headwinds are already racing
3:38
over the Atlantic after Donald Trump
3:40
confirmed his 25% tariffs on vehicle
3:42
imports to the US The American market
3:45
accounts for just under 20% of UK auto
3:48
exports and there's currently no sign of
3:50
any special treatment in the special
3:52
relationship So Reeves was right when
3:55
she said the world has changed The
3:56
problem is she's refusing to change with
3:59
it She's sticking with her damaging tax
4:01
rises on business and the disastrous
4:03
employment rights bill which the OBR
4:05
wasn't even able to factor into its
4:07
growth forecasts released yesterday On
4:10
the upside the sun is out But as spring
4:13
turns to summer the chancellor will need
4:15
a growth miracle to avoid a cold and
4:18
frosty autumn That's it from me this
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week Have a great weekend when it comes
4:22
Stay up todate and in the know with the
4:24
city app and cityam.com and I'll see you
