The rare glimmers of sunlight were brief flickers only. Spring Statement? Midwinter, more like.
After halving its growth forecast for this year to just 1 per cent, the Office for Budget Responsibility (OBR) did increase its projections for the years ahead. Rachel Reeves was pleased enough about that to leave it as a punchline. But each year, that still means growth below 2 per cent – upgrades of 0.1 percentage points or 0.2 points each year are so watery, so feeble that most people won’t notice. Real growth, of the kind we were promised at the election, seems almost as far away as ever. The Chancellor was right not to call this an emergency Budget. Had it been a Budget this week, she would have been raising taxes. Most economists think she will be forced to do so, probably this autumn.
Reeves is an admirably tough woman whose focus on defence spending and housebuilding was enough to remove any sense of immediate crisis. But the biggest question ahead remains whether the government is able – by letting US tech companies off the digital services tax – to escape Donald Trump’s tariffs next week. They could smash aside almost everything the OBR said today. Senior ministers still don’t know what Trump will do and the anxiety is palpable.
But if there is more pain ahead, today’s pain was grim enough. To halve, then freeze, the health element of Universal Credit – that is, the extra money for people with a long-term illness or disability limiting their ability to work – was brutal. For those receiving it already, it will be frozen in cash terms at £97 a week until 2029-30. But for new claimants it is cut to £50 next year and then frozen until the end of the decade. Today’s move strips away the political cover that Liz Kendall, the Work and Pensions Secretary, had when she framed the £5bn welfare cuts as pro-work and reform-driven rather than Treasury-imposed. It is hard to see how taking away money from people clearly assessed as too ill or disabled to work is progressive, or will get a single person back into a job.
As Stephen Flynn, the SNP’s Westminster leader, reminded Keir Starmer, many of the poorest families in the country, with children in deep poverty, have a family member who is disabled. The government’s own assessment on Personal Independence Payments suggests an extra 250,000 people, including 50,000 children, will be in poverty as a result of welfare changes by the end of this parliament.
Kendall, a thoughtful politician, did not look happy on the front bench. The Conservatives say that all of this is Reeves’ fault. She says none of it is. And indeed, with Trump trumping away in the White House, Vladimir Putin still hunched over his imperial ambition, and the long history of British under-investment and low productivity, with which we are so wearisomely familiar, the Chancellor was boxed in long before she stood up. With hindsight, her increase in employers’ National Insurance and the poorly targeted rise in agricultural inheritance tax, combined with her early gloom, will all be seen as Reeves mistakes. But had the headwinds been with her, we would hardly have noticed.
If Starmer has so far been a lucky politician, the same doesn’t go for his Chancellor. The biggest problem has been the shaping of the national story as Labour came into power. There was the sweeping pledge not to raise income tax, VAT or National Insurance (I don’t believe Labour’s landslide victory depended on it).
But, whichever view you take on that, the consequence was always going to be a grimly tight spending environment afterwards. The rhetoric about completely saving public services, protecting all working people and delivering real, Labour growth was overblown, perhaps triumphalist. Today it imploded.
[See also: The warfare state needs the welfare state]
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