While certain government departments celebrated Rachel Reeves’s spending review – Deputy Prime Minister Angela Rayner even threw a party the night before the Chancellor’s speech – economists are not quite as impressed. In fact, the Labour Chancellor has been accused of ‘making up numbers’ in her big speech after offering up rather incoherent guidance on how departments would make savings. Oh dear…
The director of the Institute for Fiscal Studies Paul Johnson insisted his organisation is unable to ‘find any particular area of spending the government has decided it wants to withdraw from’ except overseas aid – despite Reeves constituently claiming that the Treasury had looked ‘line by line’ at every department’s spending plans in the zero-based review. Johnson noted that almost every government unit faced ‘exactly the same cut in its administration budgets…irrespective of [any] planned spending increase’. Remarking immediately after the Chancellor’s speech that it was ‘full of numbers, few of them useful’, the IFS director added rather scathingly today:
That is not the result of a serious department by department analysis. I hesitate to accuse the Treasury of making up numbers but…
Shots fired!
In its analysis released in the immediate aftermath of the review, the IFS admitted that health and defence were the ‘big winners’ but pointed to systematic issues in the NHS and the changing international situation to caveat: ‘One has to wonder whether this will be enough.’ Meanwhile, Andrew Goodwin, chief UK economists at Oxford Economics, concluded: ‘It looks increasingly likely that substantial tax increases will be needed.’ Oo er.
It’s another bad sign for Reeves after this morning’s ‘disappointing’ news from the Office for National Statistics that revealed the UK’s GDP had fallen by 0.3 per cent in April. The Leeds West and Pudsey MP has already had to fend off suggestions that she is a ‘buy now, pay later…Klarna chancellor’ – instead insisting that amid the GDP downtick, her spending review will deliver growth. It would appear she has her work cut out winning out the economists, however…
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