{"id":176886,"date":"2025-04-08T06:41:55","date_gmt":"2025-04-08T06:41:55","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/finance\/weekend-reading-no-green-shoots-in-this-spring-statement\/"},"modified":"2025-04-08T06:41:55","modified_gmt":"2025-04-08T06:41:55","slug":"weekend-reading-no-green-shoots-in-this-spring-statement","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=176886","title":{"rendered":"Weekend reading: No green shoots in this Spring Statement"},"content":{"rendered":"


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What caught my eye this week.<\/em><\/p>\n

A<\/span> lot of water has flowed under Westminster Bridge since a UK chancellor was able to stick to their plans for a year.<\/p>\n

Rachel Reeves didn\u2019t even manage that.<\/p>\n

Since her Budget last October \u2013 and contrary to previous aspirations<\/a> to return to a once-a-year cadence \u2013 we\u2019re told the numbers had already changed enough that something had to be done.<\/p>\n

And so in the Spring Statement<\/a>\u00a0we learned<\/a> that while years-away economic growth will now apparently be higher, this year\u2019s forecast has been halved: to GDP growth of 1%.<\/p>\n

As Paul Johnson of the Institute for Fiscal Studies noted<\/a>:<\/p>\n

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The fact that a fairly run-of-the-mill change to the forecast forced her to cut her spending plans reflects the tiny amount of headroom she chose to leave against her targets last October.<\/p>\n<\/blockquote>\n

Indeed I\u2019d argue we\u2019re seeing \u2018iron rule theatre\u2019, where the chancellor pretends she can micro-manage the fine margins of tax-and-spending outcomes, even as the world rages around her.<\/p>\n

In reality there is no headroom outside of a Number 11 tweak-and-refresh in Excel<\/em>:<\/p>\n

\"\"<\/a><\/p>\n

Source: FT<\/a><\/p>\n

Home and away<\/h3>\n

Reeves partly did this to herself.<\/p>\n

Having tied her own hands before last year\u2019s election by ruling out touching the big revenue-raising levers, her October Budget<\/a> tax grab foolishly targeted a business sector already battered by successive waves of crisis.<\/p>\n

The resulting National Insurance hikes will almost certainly cause employment to be lower \u2013 by making jobs more expensive from April \u2013 and it\u2019s also hit confidence for six.<\/p>\n

And with the OBR downgrading 2025 growth from 2% to 1%, there\u2019s no gung-ho economy riding to the rescue.<\/p>\n

The West Wing<\/h4>\n

On the other hand, the man in the White House and his ripping up of the rulebook is rattling markets and business leaders globally, too.<\/p>\n

Along with his counterpart in Moscow, Trump is forcing Europe to rethink post-war norms on everything from defence spending to borrowing costs to trade partnerships \u2013 not to mention who has our back in a nuclear showdown.<\/p>\n

Now some might say this was all predictable when Reeves rose to speak last October. A Trump victory in November\u2019s US election looked near-certain by then.<\/p>\n

But I\u2019d argue that even so, all we could be sure of was a return to government by reality TV show plot twist.<\/p>\n

And as things have turned out this season is even crazier than the last one. (Where\u2019s Mike Pence when you need him?)<\/p>\n

The fact is nobody viewing this drama agrees on where we\u2019ll end up on tariffs and Ukraine \u2013 not even Trump\u2019s acolytes \u2013 let alone factors beyond his immediate control but absolutely subject to his whims, such inflation and bond yields.<\/p>\n

Neighbours<\/h3>\n

Perhaps Reeves\u2019 technocratic reforms will deliver growth eventually. The construction industry seems genuinely impressed by Labour\u2019s push on planning, for instance.<\/p>\n

In fact across Europe a welcome side effect of the White House telling the continent it\u2019s on its own could be a slaying of sacred cows on regulation, especially in the tech sector.<\/p>\n

But honestly, it\u2019s hard to see the economy catching fire anytime soon.<\/p>\n

That\u2019s not to say it won\u2019t. Maybe Germany taking the brakes off spending or an end to the immediate conflict in Ukraine could revive animal spirits. Or perhaps inflation dying a speedier death than forecast, and rates falling faster.<\/p>\n

But continuing to bump along the bottom seems the most probable outcome.<\/p>\n

And then there\u2019s Brexit, which everyone else has given up on mentioning.<\/p>\n

The UK economy is \u00a3100bn<\/a> to \u00a3140bn<\/a> smaller than it would have been, thanks to Brexit.<\/p>\n

Hence government tax receipts are \u00a330-40bn lower every year<\/a> as as a consequence.<\/p>\n

Recall: the fiscal headroom Reeves is so concerned about is only \u00a310bn.<\/p>\n

When taxes rise again or welfare is cut, remember Brexit. It\u2019s impact doesn\u2019t go away just because we\u2019re bored of it or because other stuff happened too.<\/p>\n

Brexit is permanent grit in the UK\u2019s economic engine.<\/p>\n

Auf Wiedersehen, Pet<\/h3>\n

Lots of pundits are warning us to expect more tax hikes later this year.<\/p>\n

If so, it\u2019ll mean more stealthy stuff like freezing personal allowances for longer or cutting the ISA thresholds. Raising headline tax rates after all this would be suicidal.<\/p>\n

But really, the cupboard is bare. Allowances for capital gains and the like have already been cut to the bone. The inheritance tax push on pensions has happened. Maybe the CGT rate could be hiked again, but that won\u2019t raise much money.<\/p>\n

You can see why many on the left want a wealth tax (link below) but non-doms and other wealthy types are already<\/a> fleeing the UK.<\/p>\n

Poorer people will be feeling the worse of it, but the middle-class is clearly saying enough is enough on taxes, too.<\/p>\n

Eldorado<\/h4>\n

If I were Reeves I\u2019d maybe cut stamp duty on housing transactions to a flat 1% and go harder and faster on home building.<\/p>\n

There\u2019s urgent need here, and a solid growth multiplier from an old-fashioned housing boom. If more housing availability kept the lid on house price growth, so much the better.<\/p>\n

It\u2019s not clever or pretty but it\u2019s worked before. Short of rejoining the EU by Christmas, I can\u2019t see much else delivering a speedy shot in the arm.<\/p>\n

Reeves did announce a \u00a313bn infrastructure package in the Spring Statement. This includes \u00a3625m<\/a> to train up to 60,000 skilled construction workers.<\/p>\n

Even so, getting 1.5m homes<\/a> built anytime soon will require a wartime push to ready the missing bricklayers, carpenters, and plumbers. Such combined-arms coordination seems beyond our modern politicians.<\/p>\n

So stagger on we must.<\/p>\n

Look out for your own future prosperity \u2013 not least by filling your ISAs and your pensions \u2013 because you can be sure that nobody else is.<\/p>\n

More Spring Statement bits and pieces:<\/strong><\/p>\n