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Daily Mail.co.uk, London, United Kingdom


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ANDREW NEIL: The economy's reeling from the disastrous Budget. Taxes or cuts are coming... and the big financial players I've talked to now all say it could spell the end of Labour


Дата
20250110


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ANDREW NEIL: The economy's reeling from the disastrous Budget. Taxes or cuts are coming... and the big financial players I've talked to now all say it could spell the end of Labour ANDREW NEIL: The economy's reeling from the disastrous Budget. Taxes or cuts are coming... and the big financial players I've talked to now all say it could spell the end of Labour By ANDREW NEIL, DAILY MAIL Published: 01:50 GMT, 10 January 2025 | Updated: 01:52 GMT, 10 January 2025 e-mail• Коммуникации » Интернет-коммуникации » Электронная почта 1 View comments In the run-up to the General Election , Rachel Reeves boasted repeatedly of her qualifications for being Chancellor, even liberally embellishing her CV to bolster her credentials. Now she's muted blowing her own trumpet as the economy reels in the wake of her disastrous first Budget last October, a debacle from which Labour 's economic strategy might never recover. It's become increasingly clear that, rather than being in the expert hands of a Bank of England• Объект организация » Организации по алфавиту » Организации на Ba » Банк Англии-trained economist, the Treasury is being run by 'Rachel from Accounts', who can't even get simple sums right. The strain is already beginning to tell. I watched her on Wednesday as she sat next to Keir Starmer during Prime Minister's Questions. While everybody around him made their usual sycophantic noises and exaggerated gestures to support his every mundane remark, Reeves stared ahead as if somehow disembodied from the proceedings, bags under her eyes, nervous exhaustion gripping her countenance. The Chancellor seems worried, even fearful. She has every reason to be. More tax rises and/or public spending cuts beckon. Both would be toxic for Labour in general and Reeves in particular. Economic growth, meant to be the holy grail of Labour in power, is missing in action. Come the Spring Statement on March 26, the Office for Budget Responsibility's forecast of 2 per cent growth this year will be revealed as a fantasy. Inflation is rising again. Interest and mortgage rates remain stubbornly high. Companies are freezing recruitment and investment. Business• Экономика » Бизнес confidence is severely dented. A pervasive sense of economic decline is palpable once more. Chancellor Rachel Reeves looks downcast in the Commons on Wednesday. The economy is reeling in the wake of her disastrous first Budget last October Most ominously of all, the bond markets, where the Government goes to borrow the money to pay for the billions in public spending it cannot cover with tax revenues, are signalling enough is enough. Investors will not take on any more British sovereign debt without a substantial risk premium in the form of higher yields (the annual interest paid on the money they lend). This has the makings of a slow-motion car crash for Reeves. The yield on the Government's benchmark ten-year bonds – known as gilts in Britain – hit 4.82 per cent this week. This is the highest level since the financial crisis• Финансовый кризис in 2008 – higher even than during the infamous 'ClusterTruss' (from which Labour extracted so much political capital) in the autumn of 2022. Germany• Германия, which has economic and political problems of its own, can borrow over ten years at roughly half our cost. That tells you everything you need to know about how global sentiment has soured on Britain. The higher the yield on government borrowing, the more expensive it is to service the national debt. It already costs a staggering £100billion a year – almost twice what we spend on defence – and rising. Economic stagnation• Финансовый кризис means lower tax revenues. Yet the Reeves Budget increased public spending by 4.3 per cent this financial year (2024/5) and a further 2.6 per cent in the next, which meant more borrowing. As a result, the Chancellor is now close to breaking her own fiscal rules. She allowed herself £10billion of headroom in the Budget to stay within the rules, which was tight. Capital Economics, a consultancy, reckons that – thanks to the increased cost of borrowing – that figure is already down to £1billion, which is no headroom at all. If the economy continues to flatline in the first half of this year, which is likely, then Reeves will have to raise taxes again. So much for 'fixing the foundations'. She could, of course, cut spending instead. But for 14 Tory years the Labour lexicon relentlessly made spending cuts synonymous with austerity, even when it was often no such thing. A smiling Ms Reeves after Labour's election victory in the summer. Economic growth, meant to be the holy grail of Labour in power, is missing in action, writes Andrew Neil I'm not sure a Labour Chancellor could survive the scale of cuts needed to stay within the fiscal rules. But tax rises will exact a huge political toll as well on a Government whose poll ratings have already plummeted to rock bottom just six months into its reign. Reeves promised the Confederation of British Industry last November that her first tax-raising Budget would also be her last. There would be no more tax rises, she promised, in a vain attempt to restore her reputation with business• Экономика » Бизнес, which quickly turned on her after she slapped £20billion of tax rises on companies. It was a foolish pledge, given she had no idea what stormy waters the UK• Великобритания economy was about to enter, and not one that she or Keir Starmer have repeated, though Downing Street briefed anonymously this week that 'We will not repeat a Budget like the last one'. The bond markets don't believe it. They remember how Labour insisted during last summer's election campaign that all its spending plans were fully costed then proceeded with a massive tax-raising Budget. 'Labour lied then,' one bond investor told me this week. 'We think it's lying again.' I spoke to a number of big players in the bond markets this week and read the reports of others. It is clear to me a sea change is underway in their attitude to Britain – and not in a good way. They see the huge public-sector pay rises doled out by Labour as profligate and inflationary. They note that public-sector productivity has barely risen at all this century. They have even recalibrated their attitude to public investment. Hitherto regarded as an indisputable 'good thing' by investors, politicians on the Left and the Right and a cheerleading media, it is at last dawning on them that a lot of state investment is poor value for money. Just look at the HS2 farrago, the delays and cost-overruns of Hinkley Point's new nuclear power station, the Scottish ferries fiasco, the billions Energy Secretary Ed Miliband is about to throw down the drain in pursuit of his net zero nonsense. When interest rates were abnormally low, the need for a rigorous assessment of public investment was less necessary. Low-cost borrowing made lots of marginal projects look attractive. Read More The best thing Kemi could do is go and see how Sweden is dealing with its migration crisis Much of Labour's thinking on public investment was formulated during the era of cheap money. But the cost of capital is far higher these days, making some public investment harder to justify. Labour's thinking has not moved with the times. But the bond markets have. They are no longer in any mood to flash unlimited cash for politicians hooked on debt-financed spending sprees. Britain is not in this alone. A sell-off in government bonds is causing borrowing costs to rise around the world. Most major economies are awash with government debt and investors, already satiated with it, are reluctant to take on more. Yields on America's ten-year Treasury bonds jumped above 4.7 per cent for the first time in nearly nine months this week, as the markets realise that Donald Trump is likely to exacerbate the US's $36trillion national debt and $1.8trillion budget deficit. France• Франция's fiscal position is worse than Britain's• Великобритания. Even the borrowing costs of frugal Germany• Германия are rising. But the bloom is off Britain the most – our borrowing costs are rising faster than others – because Labour has made a bad situation worse. It inherited a growing economy which is now in the doldrums. Instead of reinvigorating the private sector – the only reliable route to sustainable growth – it administered a punishment beating. Far from being prudent with public spending it opened the taps to slake the thirst of its core public-sector support. A promise to make us the fastest-growing economy in the G7• Объект организация » Организации по алфавиту » Организации на Со » Большая семерка (G7) club of rich economies has become a struggle to keep us out of recession. It's a struggle Labour looks like losing, especially if it resorts to yet more tax rises, which would merely speed up the debilitating cycle of decline. Only a few months ago, Labour crowed that its huge majority would be the engine of growth, giving us the political stability others could only dream of. It never told us it would be the stability of the graveyard.

============= Итог:
2,0000 ; Финансовый кризис

1,3125 ; Коммуникации#Интернет-коммуникации#Электронная почта

1,2500 ; Экономика#Бизнес

4,4000 ; Франция#Германия
4,4000 ; Франция#Большая семерка (G7)
4,4000 ; Франция#Великобритания

3,2000 ; Великобритания#Франция
============= Объекты:
организации

	Банк Англии

	Большая семерка (G7)
		Великобритания 
		Германия 
		Франция 


============= Географические объекты:
1 52.523333333,13.411388889 Германия
2 46.850000000,2.566666667 Франция
3 51.507500000,-0.128888889 Великобритания



============= Связи:
	Франция # ассоциации-4 # Великобритания
	Франция # ассоциации-4 # Германия