Statements from Chancellors of the Exchequer are rarely what they seem to be at first glance, and Rachel Reeves’ statement in the Commons was no different. A visibly angry Chancellor set out the initial findings into her audit on the state of the nation’s finances.
The sense of drama was heightened when it was announced that the Chair of the Office for Budget Responsibility (OBR) had launched a review into the forecasts they had prepared for the Spring Budget. Adding credibility to the Chancellor’s claims of economic mismanagement and denting the Conservative’s counterattack that the whole process was designed to allow her to U-turn on her election tax pledges.
Much of the detail of the statement had been trailed, but it will increase the political pressure on her and the government in the short term.
Her need to find immediate savings for this year and next led to her surprise decision to scrap winter fuel payments for those not in receipt of pension credit or other benefits. Likewise, the decision to review the previous government’s New Hospital Programme will increase the political pressure from MPs in the constituencies affected.
Included in the detail of the Treasury’s further announcements were the government’s confirmation of its manifesto commitments on introducing VAT on private school fees, changes to the Energy Profits Levy (windfall tax on oil and gas) all of which show this is a government in a hurry and that it intends to deliver on its manifesto.
They will hope that by ‘kitchen sinking’ as many problems as they can and creating a burning platform that demands action they will free up the second half of the year for positive action and policies.
She will also hope that her plans for three-year spending reviews, along with her commitment to her fiscal rules alongside the Budget on 30th October, will help to bring a sense of stability and planning to the British economy in time for her investment summit in the autumn.
Kieran Simpson was part of Labour’s economic team under Gordon Brown and worked as a Special Advisor in three government departments. He is currently an Associate Director at Arden Strategies.
