Peter Kyle defends government as Reeves faces criticism about pre-budget briefings ahead of Wednesday announcement
Good morning. We are two days away from the budget and, although we have a good idea of some of the main measures in it, the real debate about whether they are wise or not will not kick off until Wednesday afternoon. But Rachel Reeves, the chancellor, is already facing criticism about the handling of the process ahead of Wednesday, and this morning, with the CBI holding its annual conference, those comments are getting fresh prominence.
Put bluntly, expectation management is widely seen as having been shambolic. Two decisions in particular have backfired. First, this time last year, at the CBI conference, Reeves said explicitly that the 2025 budget would not involve tax rises on the scale of the 2024 one, but now it is clear that they will. Then, three weeks ago, Reeves gave a speech in Downing Street signalling very clearly to the markets, and to her party, that she was going to have to raise income tax in the budget, in breach of the manifesto. (Some of her allies now claim she was only floating an option, but that is not how her government colleagues understood it, or presented it, at the time; she was pitch rolling, not kite flying.) But then she changed her mind.
We’ve had month upon month of speculation – fiscal fandango, basically. And that’s been costly for the economy. It’s caused paralysis among business and consumers. It’s the single biggest reason why growth has flatlined, it’s been grounded in the second half of the year.
There are a number of data points that suggest that the prolonged speculation has flatlined growth. You see this in the latest retail sales numbers, which were the first to decline since May.
You see this in the decline of business confidence and consumer sentiment.
This whole run into the budget has been really difficult and I think that in any future budgets lessons will be learned not to indulge in the constant technically pitch rolling – all these different ideas being inflated and then withdrawn and then tried again. It’s been really confusing to businesses and it’s unnecessary … This frankly pretty shambolic process in the run into [the budget] has been unhelpful.
The biggest single challenge to growth in this country is the inheritance this government had. The Brexit deal alone has taken 4% of GDP off the whole economy. That is a fact. It far outweighs anything that speculation could and did cause.
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