Economy

Rachel Reeves has been warned again that the slim headroom against her ‘ironclad’ fiscal rule could be wiped out if growth prospects worsen. The Organisation for Economic Co-operation and Development (OECD) said in its latest economic outlook for the UK that ‘very thin fiscal buffers could be insufficient to provide adequate support without breaching the fiscal rules in the event of renewed adverse shocks’. The OECD also downgraded Britain’s growth forecast. It predicted the economy will grow by 1.3 per cent in 2025 and then just 1 per cent next year – a fall from their previous forecast of 1.4 and 1.2 per cent. The OECD said this downgrade was

At last they have found it. Or, at least, they think they have. Sir Keir Starmer and Kemi Badenoch have been hunting around for months trying to find Nigel Farage’s Achilles’ heel. While they have been searching, the popularity of the Reform party has soared ahead of that of their own parties. But now, finally, they reckon to have identified the weak spot. In their shared enthusiasm, they both described Reform’s emerging tax plans as ‘fantasy economics’. Starmer gave the bemused workers at a glass factory a seven-minute harangue about it, declaring Reform’s plans a ‘mad experiment’. Badenoch fumed that ‘Jeremy Corbyn’s “magic money tree” is back’ with a Reform

Keir Starmer has already folded on the winter fuel payment, promising a partial reversal of the policy by reinstating it for pensioners in receipt of pension credit. How much longer before the proposed £4.8 billion cuts to welfare benefits go the same way? This morning, the Health Foundation think tank has issued a pronouncement that will be a red rag to critics of Labour’s welfare cuts: that the effect of Starmer’s reform of disability benefits will be four times as great as changes proposed by the Conservatives before the election and on a similar scale to George Osborne’s benefits cuts of 2015. Those cuts, announced in Osborne’s July budget of

This week Dominic Cummings said the Tories may have ‘crossed the event horizon’. He was trying to find a tech bro way of saying the game is up: they’re finished as an electoral force and it’s only Labour, Reform and the Lib Dems still in play. But might the Tories have one last chance? If they do, that chance will come from the economy. Next week the shadow chancellor, Mel Stride, will try to make the case for the Tories being the party of economic responsibility in a keynote speech to the Royal Society for Arts, Manufactures and Commerce. ‘Our country faces significant and increasing challenges both at home and

The International Monetary Fund (IMF) has warned Britain faces ‘difficult fiscal choices’ if it is to meet ever increasing spending pressures. The fund predicted a surge in public spending, driven largely by commitments to welfare, health, and pensions. According to the IMF, these policies will push public spending as a share of GDP up by 8 per cent by 2050. The message is clear: unless revenue is increased – i.e even more tax rises  – the UK will need to confront ‘tough policy decisions’ about the future role of the state and the scale of public services it can afford to deliver. Crucially, the IMF noted that the government’s ability to

Some of the most infamous words in politics are ‘read my lips, no new taxes’ – uttered by George H.W. Bush as he accepted the nomination as the Republican candidate for the 1988 US presidential election. It helped him win that year but contributed to his downfall in 1992 as he failed to stick to his promise. We can argue how much of Bush’s defeat by Bill Clinton had to do with the broken tax promise and how much was to do with recession, but ‘read my lips, no new taxes’ should certainly have been on Rachel Reeves’s mind in recent months. The tragedy of Starmer’s Labour is that it

To borrow a phrase that was once famously used about the Pentagon, ‘a billion here, a billion there and pretty soon you are talking real money’. The Labour government has certainly been spending some ‘real money’ this week. If you tot up the total amount it has added to spending over the last five days, it comes to an extraordinary £50 billion. The British state is rapidly losing control of its finances, and it is no surprise the bond markets that will have to finance it all are getting worried.  If the Chancellor Rachel Reeves decides, like many of us, to check her bank balance as the week ends, she

Finally, in a horrible week for Rachel Reeves which has seen inflation surge, the public finances take a dive and her authority undermined by Angela Rayner’s memo and the Prime Minister’s U-turn on the winter fuel payment, a glimmer of good news. Retail sales rose by 1.2 per cent in April. The Office for National Statistics (ONS) did, however, revise down March’s figure from 0.4 per cent growth to 0.1 per cent. The quarterly figures, which are more reliable, show that sales volumes were up 1.8 per cent between February and April. There is now a clear trend. Retail sales volumes bottomed out in December 2023 and have been generally