Could budget ‘jiggery-pokery’ scare investors?

Published

9 months ago

October 29, 2024

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Budgets are all about numbers.

In the coming 24 hours, we’ll be engulfed with all sorts of figures – about the state of the economy, about the size of the deficit, about the fiscal rules the new chancellor is planning to introduce in the coming months.

But in fact most budgets, this one included, can really be boiled down to the difference between two big numbers.

Politics live blog: Budget 2024 latest developments

Total government spending and total government receipts.

Right now the UK government is spending just over £1.2trn a year and bringing in just over £1.1trn in taxes and receipts.

In other words, this country is spending more than it generates in tax receipts.

So it has to borrow the difference.

That borrowing, also known as the deficit, is (as you’ve already probably worked out from the above numbers) around £100bn a year.

And politicians, including the chancellor, spend rather a lot of time fretting about the deficit.

Indeed, the main objective of the various different fiscal rules they’ve imposed on themselves in recent decades has been to narrow the gap between those two big numbers.

Broadly speaking, the easiest way to do this is to cut something few people notice in the short run – government investment.

When he came into office in 2010, George Osborne cut a lot of parts of public spending, but he absolutely slashed the amount the public sector spent on buildings, infrastructure and machinery – capital spending.

Having lifted the total briefly after the pandemic, Jeremy Hunt was planning a similar fall in investment in the coming years.

Rachel Reeves has said repeatedly ahead of the budget that she plans to invest far more in the coming years.

This is a noble goal, given investment tends to benefit future generations, however, it will not be cheap in the short run.

Indeed, keeping investment spending at current levels will cost roughly £30bn a year by the end of this decade.

So how does the chancellor square that with her fiscal rules?

Well, one part of the answer is that she’s planning to increase the revenues coming into the Exchequer, reportedly via higher national insurance charges for insurers.

But the other part of the answer is that she’s changing her fiscal rules as well.

Budget 2024: Rachel Reeves vs the fiscal rules

The long and the short of it is that Ms Reeves looks likely to choose a set of fiscal rules that ignore investment spending.

Both her updated debt rule and her current budget rule essentially omit capital spending – although they include debt interest costs, so she can’t just borrow willy-nilly.

That might sound like fiscal jiggery-pokery, and some in the market fret that investors will soon take fright as a result.

Indeed, some suggest they already are, and point to the fact the UK’s cost of government borrowing – as measured by the benchmark 10-year bond yield – has risen from under 4% to nearly 4.3% in the past month alone.

However, this is a slight misreading of this market, which is as affected by global economic factors and central bank action as much as by UK budgetary policy.

Indeed, compare the recent changes in the UK’s borrowing rates with those in Germany and the US and British government bond yields are close to where they usually trade in the run up to a budget.

And they are far, far below where they were in the run-up to Liz Truss’s mini-budget.

Even so, there are bound to be a few unexpected surprises and some relevant new data points in this fiscal event.

It is a budget after all.

Politics

Crypto influencers are replacing VCs, and that’s a good thing

Published

8 mins ago

August 9, 2025

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Crypto influencers are replacing VCs, and that’s a good thing

Crypto influencers democratize early-stage investing by offering transparent, accessible opportunities that VCs keep behind closed doors for the elite.

Politics

UK, Australia, Germany, Italy and New Zealand condemn Israel’s plan for new operation in Gaza

Published

9 hours ago

August 9, 2025

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UK joins four countries in condemning Israel's plan for new operation in Gaza

The UK and four allies have criticised Israel’s decision to launch a new large-scale military operation in Gaza – warning it will “aggravate the catastrophic humanitarian situation” in the territory.

The foreign ministers of Britain, Australia, Germany, Italy and New Zealand said in a joint statement that the offensive will “endanger the lives of hostages” and “risk violating international humanitarian law”.

It comes a day after Israel’s security cabinet approved an operation to take military control of Gaza City – and concluded a full takeover of the enclave is required to end the conflict.

It marks another escalation in the war in Gaza, sparked by the Hamas attack of 7 October 2023.

In their joint statement, the UK and its allies said they “strongly reject” the decision, adding: “It will endanger the lives of the hostages and further risk the mass displacement of civilians.

“The plans that the government of Israel has announced risk violating international humanitarian law. Any attempts at annexation or of settlement extension violate international law.”

The countries also called for a permanent ceasefire as “the worst-case scenario of famine is unfolding in Gaza”.

It comes as Sky News analysis has found that airdrops of aid are making little difference to Gaza’s hunger crisis, and pose serious risks to the population – with a father-of-two killed by a falling package.

Meanwhile, France, Canada, Qatar, the United Arab Emirates and the United Nations all criticised Israel’s plan for a full occupation of Gaza.

Israeli Prime Minister Benjamin Netanyahu “expressed his disappointment” with German Chancellor Friedrich Merz’s in phone call on Friday after Berlin decided it would stop selling arms to Israel.

In a post on X, the Israeli prime minister’s office added: “Instead of supporting Israel’s just war against Hamas, which carried out the most horrific attack against the Jewish people since the Holocaust, Germany is rewarding Hamas terrorism by embargoing arms to Israel.”

US ambassador hits out at Starmer

Earlier on Friday, the US Ambassador to Israel, Mike Huckabee, criticised Sir Keir Starmer after he said Israel’s decision to “escalate its offensive” in Gaza is “wrong”.

Mr Huckabee wrote on X: “So Israel is expected to surrender to Hamas & feed them even though Israeli hostages are being starved? Did UK surrender to Nazis and drop food to them? Ever heard of Dresden, PM Starmer? That wasn’t food you dropped. If you had been PM then UK would be speaking German!”

In another post around an hour later Mr Huckabee wrote: “How much food has Starmer and the UK sent to Gaza?

“@IsraeliPM has already sent 2 MILLION TONS into Gaza & none of it even getting to hostages.”

Sir Keir has pledged to recognise a Palestinian state in September unless the Israeli government meets a series of conditions towards ending the war in Gaza.

The UK and its allies criticised Israel as US President JD Vance and UK Foreign Secretary David Lammy met at Chevening House in Kent on Friday.

Mr Vance described a “disagreement” about how the US and UK could achieve their “common objectives” in the Middle East, and said the Trump administration had “no plans to recognise a Palestinian state”.

He said: “I don’t know what it would mean to really recognise a Palestinian state given the lack of functional government there.”

Mr Vance added: “There’s a lot of common objectives here. There is some, I think, disagreement about how exactly to accomplish those common objectives, but look, it’s a tough situation.”

The UN Security Council will meet on Saturday to discuss the situation in the Middle East.

Ambassador Riyad Mansour, permanent observer of the State of Palestine to the United Nations, said earlier on Friday that a number of countries would be requesting a meeting of the UN Security Council on Israel’s plans.

Politics

BlackRock launching a SOL ETF in first wave would be ‘messed up’ — Analyst

Published

9 hours ago

August 9, 2025

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<div>BlackRock launching a SOL ETF in first wave would be 'messed up' — Analyst</div>

BlackRock hasn’t filed for a Solana ETF, but ETF analyst James Seyffart says they shouldn’t be allowed to jump in at the last minute after other issuers’ hard work.