There are already enough budgets: Reeves must stop the shortage and start making difficult decisions, says ALEX BRUMMER
When is a budget not a budget? If this were (highly unlikely) a Christmas cracker teaser, the answer would probably be: if you call it something else.
Rachel Reeves says she will not hold a tax increase budget in the spring, but will instead issue a statement to MPs alongside new budget forecasts.
But the Chancellor has already developed a reputation for dancing on pinheads, which doesn’t inspire much confidence.
When Reeves made her ‘fixing the foundations’ statement on July 30 this year, detailing the astonishing discovery of a £22 billion black hole, she did not hesitate to donate ‘savings’ worth £5.5 billion in the current fiscal years to slip away. 8.2 billion by 2025-26.
This included scrapping the winter fuel allowance for pensioners, canceling social care plans and cutting up to £800 million for AI research at the University of Edinburgh.
What the chancellor has not ruled out this spring is further pressure on government spending if the Office for Budgetary Responsibility finds her off course to meet budget targets.
There’s no other way: Rachel Reeves says she won’t hold a tax hike budget in the spring, but will instead issue a statement to MPs alongside new budget forecasts
That seems likely given the data showing that the economy is stagnating rather than growing.
A stumbling block for production means lower tax revenues, rising social security contributions and more loans. The March 26 statement to parliamentarians could anticipate a further review of government spending promised for July.
Confused? Most people will be. The nation may only receive one official budget per year, but there will be no shortage of financial statements and interim corrections. Working words need to be watched.
No increase in national insurance was reinterpreted as no employment tax for working people. Imposing a £25 billion national insurance levy on employers was fine.
One consequence of the hard blow to employers is that the Chancellor is now reconsidering the second phase of the pension review.
The first part was all about pooling funds and freeing them up to invest in Britain.
In the second phase we had to focus on whether automatic enrollment in defined contribution plans is good enough to generate a comfortable retirement.
Currently, 8 percent of income is paid into such funds, with at least 3 percent coming from the employer.
But having imposed National Insurance on employers, Reeves now thinks it may not be wise to inflict further pain on businesses.
This appears to be another example of postponing difficult decisions, which could ultimately increase pressure on the treasury.
The concern about all this is being unprepared for the unexpected. The financial crisis, pandemics and the war in Ukraine have all shown how events can overwhelm the best policy intentions.
A country that pays the highest taxes in peacetime will not want the Chancellor to reach deeper into the pockets of citizens and companies. But closing the door makes no sense.
Creative tension
The arrival of Paddington Bear filmmaker Canal+ turned out to be more of a bleak than a boost for the London market.
There may be technical reasons for the share price decline – French tracker funds have sold their positions – but this was not the confidence expected.
Support for Britain’s creative industries – which will eventually claim up to 10 percent of national income – is crucial. British creative groups, including publishers and authors, see a major threat to the exclusivity of their production on the horizon.
The use of AI to imitate word patterns, music fragments, film clips and the like, thereby infringing on copyright, poses a huge threat.
Much the same problem arose when Google plundered parts of published works in the early days and when pirates attacked songbooks.
The government promises a consultation. Given the speed at which such reviews are carried out, there is a danger that by the time Whitehall gets to grips with a complex legal and creative issue, the bird will have flown.
There should also be concern that as Labor embraces big tech, new British investors will treat Silicon Valley with kiddie clothes, at the expense of artistry and originality.
That should never happen.
Lost bags
Here’s a piece of technology to cheer you up. British Airways will install Apple AirTags into its baggage handling systems with the aim of speeding up the process of locating and delivering wayward suitcases.
That could reduce costs for the carrier and ease travelers’ concerns. It should not be an excuse to lower performance standards.
DIY INVESTMENT PLATFORMS
A. J. Bell
A. J. Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund trading and investment ideas
interactive investor
interactive investor
Invest for a fixed amount from € 4.99 per month
Sax
Sax
Get £200 back in trading fees
Trade 212
Trade 212
Free trading and no account fees
Affiliate links: If you purchase a product, This is Money may earn a commission. These deals have been chosen by our editors because we believe they are worth highlighting. This does not affect our editorial independence.