Wednesday, 26 March 2025
UK Chancellor Rachel Reeves delivered her much anticipated Spring Statement earlier today.
Dr Christopher Byrne, Assistant Professor in British Politics, in the 糖心原创’s School of Politics and International Relations, reacts to the announcement.
“Chancellor Rachel Reeves today announced cuts to disability benefits amounting to some £5bn and a range of other measures to try to balance the books after her £10bn cushion in the public finances was wiped out by slower economic growth and higher borrowing costs.
“To say this is a bad look for a Labour Chancellor would be an understatement. It was never supposed to happen, so why has it? The Chancellor pointed to the turbulence caused by the new Trump administration’s tariff policies, and rising borrowing costs for government debt around the world. That, along with the need to stick to her fiscal rules, which require day-to-day government spending be fully financed by tax revenues by 2029–30, helps explain the shift.
This is an incomplete picture though. The reality is that Britain is less exposed to the Trump tariffs than many other countries, as it is not a major exporter to the US.
"Furthermore, the real constraint on further borrowing is not the Chancellor’s rules, but the simple fact that international markets no longer view the UK as creditworthy enough to borrow to at low cost. For example, while Germany pays 2.8 per cent on 10-year bonds, the UK has to pay 4.8 per cent.
“Ultimately, the real problem is that the UK’s economic model, predicated on low inflation and low interest rates, is no longer working and the Labour government has not yet found a viable new one. The ‘Securonomics’ agenda touted by the Chancellor prior to entering government only works with massive public investment, but where is that supposed to come from if there are no easy solutions when it comes to taxing more, borrowing more or growing the economy?”
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