Rachel Reeves must break her fiscal rules. Better now than later | Phillip Inman
Critics of Rachel Reeves are enjoying another “told you so” moment.It was never realistic, they say, to formulate a budget plan with virtually no leeway to accommodate for unforeseen events.Less than £10bn of headroom on a budget of £1.2tn was asking for trouble.It is clear there are just too many events that could be put on a list of “known unknowns” for a UK chancellor to almost wilfully wish away their potential impact on the economy and the public finances.
One of those was the prospect of Donald Trump winning the US presidency and, once installed in the White House, pulling every lever at his disposal to create the uncertainty, if not chaos, he believes gives the US supreme bargaining power over whatever issue he wants to tackle,The global tariff war unleashed by the mobster-like president last week is a case in point,At last month’s spring statement, Reeves rejected another opportunity to inject more flexibility into her budget rules to accommodate the almost inevitable swings in economic forecasts that, in turn, affect the public finances,The Office for Budget Responsibility (OBR), the body that produces independent forecasts for the Treasury, has shown in charts how Reeves is one of the worst offenders since the OBR was created in 2010,Previous chancellors have tended to leave themselves a bigger buffer to absorb changes to the forecasts.
The implication is that they offered more certainty about the direction of travel,What the OBR’s analysis must ignore, though, is the political imperative behind maintaining a significant buffer in the public finances and why the largest can be traced to George Osborne’s time as chancellor,Osborne’s agenda was to reduce the size of the state,It meant that a buffer of about £30bn was part of the overall austerity message,Any chancellor who wants to energise government to boost economic growth, as Reeves wants to do, is going to find it difficult to leave tens of billions of pounds unspent, sitting in a reserve fund, just to accommodate a budget rule, albeit one that is self-imposed.
That leaves the UK in an unenviable situation,Unless the budget rule is ditched, the situation will persist,There is already speculation that the autumn budget will need to raise taxes again to cope with the fallout from Trump’s tariff regime,A 10% tariff might have left the UK relatively unscathed compared with the EU’s 20%, but Trump’s trade war will hit global growth and, with it, the UK’s economic outlook,A downgrade to the prospects of growth over the next few years will reduce tax receipts and government income.
On the plus side, a slowdown in the world economy means the Bank of England will want to cut interest rates at a faster pace – or at least it ought to,And international investors will lend to governments at a cheaper rate,A decline in borrowing costs will be a boon for Reeves, who inherited a debt-to-GDP ratio of close of 96%, and little room for manoeuvre after the Liz Truss debacle,How these cross-currents affect the budget deficit is not clear,Lower growth will increase the deficit, while cheaper debt will reduce it.
Even if the result is a positive number, it leaves businesses to wonder whether there will be higher taxes or not.And what we know about business sentiment is that it is very sensitive to the government’s tax and spending plans.Most business people don’t like to take risks, whatever they say in public.They want the reassurance of solid government backing for projects that enhance growth.Investment decisions often take at least five years before they make a return, during which time businesses will want a settled economic outlook.
The UK can look back on a disastrous decade of low business investment largely because Tory infighting over Brexit meant the direction of travel was a subject of constant debate.What can Reeves do? She needs to end the speculation – and soon.Waiting for the next budget creates another six months’ more uncertainty.It also ties the summer spending review to austerity-lite spending limits.If the need to protect welfare payments and for higher defence spending was not enough to justify rewriting the budget rules before the spring statement, surely Trump’s tariffs provide the green light now.
Loosening the deficit rule would allow the government to protect businesses from the worst of the downturn and intervene in industries that are essential to the UK’s independence, such as steel.Cuts to police numbers could be avoided and cash-starved bodies, such as further education colleges, could be given a new lease of life.Otherwise, there is the prospect of perpetual debate about what more pain each budget will bring, killing consumer and business confidence and the growth the UK desperately needs.
Does the UK have a mental health overdiagnosis problem?
When the health secretary, Wes Streeting, suggested the “overdiagnosis” of some mental health conditions was a factor in the government’s welfare changes, many saw the comments as playing into an unhelpful culture-war stereotype of coddled millennials – and as echoing Rishi Sunak’s claim, a year ago, that there was a “sicknote culture” plaguing Britain’s economy.But media coverage of Dr Suzanne O’Sullivan’s recent book, The Age of Diagnosis, has amplified and lent credibility to the idea that a diagnosis, in itself, can risk limiting an individual’s life prospects.Streeting’s comments came amid plans for substantial cuts to personal independence payments (Pip), after the government concluded that the overall bill for disability benefits, which rose by nearly £13bn to £48bn between 2019-20 and 2023-24, was on an unsustainable trajectory. Much of the increase in spending is linked to a huge rise in the number of working-age adults claiming disability benefits linked to mental ill health on a scale that demands a policy response. At the heart of the debate is the question of what has caused this increase and how it could be reversed
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AI cancer screening rollout should be accelerated in the NHS | Letters
The stark mismatch between government rhetoric around the use of artificial intelligence and its implementation in the NHS in England is highlighted in your article (‘Ridiculous’ cuts to AI cancer tech funding in England could cost lives, experts warn, 31 March).At the 2024 Labour party conference, Wes Streeting told his audience that AI “is happening” and made specific mention of its use in the diagnosis of skin cancer. The reality is different. Although AI for the diagnosis of skin lesions has indeed been successfully piloted by NHS England, its rollout has been significantly slowed over the last 12 months because of uncertainty relating to an early value assessment (EVA) by the National Institute for Health and Care Excellence (Nice). The EVA started in October 2023, with final recommendations only due to be published shortly
Sir Torquil Norman obituary
Torquil Norman, who has died aged 91, was successively a naval pilot, banker and businessman, philanthropist and toymaker. He created several popular toys of the 1980s and 90s, before using his wealth and powers of persuasion to buy the then disused Roundhouse building in north London and raise £30m to restore it to a successful arts and concert venue.In a long and varied career, perhaps somewhat at variance with his establishment background, he opened the swimming pool in the garden of his St John’s Wood home each summer for local children, set up with his wife a charitable trust to support young people, was a supporter of the anti-apartheid and anti-slavery campaigns and argued for social and political reform, national community service and constitutional change.He was the third son of Sir Nigel Norman, a civil engineer whose firm designed London’s first commercial airport at Heston, Middlesex, close to where Heathrow is now, as well as several other prewar airfields, and Patricia (nee Annesley), Torquil’s first name being a nod to her Catholic, northern Irish roots. Nigel was a pioneer aviator and flew Torquil to Switzerland at the age of six to seek treatment for his tuberculosis
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Plan to increase access to NHS dentists in England ‘a complete failure’, MPs say
The official plan to increase access to NHS dental services in England has been a “complete failure”, and some of the government’s initiatives have worsened the crisis, a damning report warns.Millions of patients continue to be denied dental care, forcing them to pay for private treatment, build up mountains of credit card debt, or even worse perform dangerous DIY dentistry on their own teeth, the research by MPs found.Without immediate and significant changes to fix the “broken” system, there would be no future for population-wide access to NHS dentistry, the report by the public accounts committee (PAC) said.“This country is now years deep in an avalanche of harrowing stories of the impact of dentistry’s system failure,” said Geoffrey Clifton-Brown, the chair of the committee. “It is utterly disgraceful that, in the 21st century, some Britons have been forced to remove their own teeth
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