Could Rachel Reeves’s budget ‘jiggery-pokery’ scare investors?
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.
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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.
Jaguar wants “to be bold and disruptive” with its new electric car and redesign, the luxury vehicle maker’s managing director told Sky News.
The British car maker sparked widespread controversy last month when it unveiled its rebrand ahead of becoming a fully electric brand.
Speaking to Sky News business and economics correspondent Gurpreet Narwan, managing director Rawdon Glover said: “We’ve certainly gathered an awful lot of attention over the last few weeks, but now I think its really important to talk about the vehicle.”
The Type 00 electric car was unveiled in Miami on Monday. Pic: Jaguar
The Type 00 has now been unveiled at an event in Miami, Florida, and was described as a “concept with bold forms and exuberant proportions to inspire future Jaguars”.
It has been revealed in two colours, Miami Pink and London Blue.
Jaguar said the new electric car uses a dedicated platform which should return up to 478 miles of range while rapid charging will add 200 miles of charge in 15 minutes.
The production-ready version of the Type 00, which will be made in the UK, is set to be revealed late in 2025, and although prices have not yet been confirmed, it is expected to cost more than £100,000.
Mr Glover added to Sky News: “We need to make sure that Jaguar is relevant, is desirable, is future proof for the next 90 years of its history.
“At the moment, the industry is going through huge disruption: technology changes, as we all figure out actually what an electrified world means for our brand.
“At Jaguar, we’ve looked at that and we think we have to make a really bold step forward. But actually, the step we’re going to take is completely in keeping in ethos with the brand.”
Rawdon Glover said ‘people will have opinions about the vehicle’. Pic: Jaguar
In November, Jaguar released an advert which featured a series of models, in brightly-coloured clothing, emerging from a lift into an austere landscape. It also featured none of Jaguar’s cars.
The carmaker described it as part of a “completely transformed Jaguar brand” and “a new era” which makes “it relevant for a contemporary audience”, however, the campaign sparked a backlash online, with Reform leader Nigel Farage saying “I predict Jaguar will now go bust. And you know what? They deserve to,” while Tesla boss Elon Musk asked “do you sell cars?”
When asked about the rebrand, Mr Glover told Sky News: “We want to be bold and disruptive… We’re clearly in the conversation.
“More people have been talking about Jaguar for the last two weeks than – goodness, for so much longer. Car companies unveil new cars all the time and go completely unnoticed.”
When asked if he anticipated the backlash to the advert, the Jaguar director said: “We absolutely don’t want to alienate any of our loyal fans.
“Quite the opposite – we want to take as many of our current fans with us on that journey… We need to also appeal to a new audience. That’s what we need to do.”
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However, while he accepted “people will have opinions about the vehicle” and the rebrand, Mr Glover added: “We absolutely value a reasoned debate – if it gets discriminatory, then I can’t condone that.”
“We really want the conversation now to move on to, ‘here is our design vision, this is actually what the future of Jaguar will look like,’ and actually that should be the conversation,” he added.
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