Spring statement: Rachel Reeves can make decisions on spending cuts without too much fallout for now – but worse could be yet to come
Rachel Reeves will keep her remarks short when she delivers the spring statement on Wednesday.
But the enormity of what she is saying will be lost on no one as the chancellor sets out the grim reality of the country’s finances.
Her economic update to the House of Commons will reveal a deteriorating economic outlook and rising borrowing costs, which has forced her to find spending cuts, which she’s left others to carry the can for (more on that in a bit).
Politics Live: Polling suggests almost everyone is pessimistic
The independent Office of Budget Responsibility (OBR) is expected to forecast that growth for 2025 has halved from 2% to 1%.
That, combined with rising debt repayment costs on government borrowing, has left the chancellor with a black hole in the public finances against the forecasts published at the budget in October.
Back then, Reeves had a £9.9bn cushion against her “iron-clad” fiscal rule that day-to-day spending must be funded through tax receipts not debt by 2029-30.
But that surplus has been wiped out in the ensuing six months – now she finds herself about £4bn in the red, according to those familiar with the forecasts.
That’s really uncomfortable for a chancellor who just months ago executed the biggest tax and spend budget in a generation with the promise that she would get the economy growing again.
At the first progress check, she looks to be failing and has been forced into finding spending cuts to make up the shortfall after ruling out her other two options – further tax rises or more borrowing via a loosening of her self-imposed fiscal rules.
Please use Chrome browser for a more accessible video player
What to expect in the spring statement
‘World has changed’
When Reeves gets up on Wednesday, she will put it differently, saying the “world has changed” and all that means is the government must move “further and faster” to deliver the reforms that will drive growth.
But her opponents will be quick to lay economic woes at her door, arguing that the unexpected £25bn tax hike on employers’ national insurance contributions last October have choked off growth.
But it’s not just opposition from the Conservative benches that the chancellor is facing – it is opposition from within as she sets about cutting government spending to the tune of £15bn to fill that black hole.
Politically, her allies know how awkward it would have been for the chancellor to announce £5bn in welfare cuts to avoid breaking her own fiscal rules, with one acknowledging that those cuts had to be kept separate from the spring statement.
There’s also expected to be more than £5bn of extra cuts from public spending in the forecast period, which could see departments that don’t have protected budgets – education, justice, home – face real-term spending cuts by the end of the decade.
Pic: PA
Not an emergency budget
We won’t see the detail of that until the Spending Review in June.
This is not an emergency budget because the chancellor isn’t embarking on a round of tax raising to fix the public finances.
But these are, however they are framed, emergency spending cuts designed to plug her black hole and that is politically difficult for a government that has promised no return to austerity if some parts of the public sector face deep cuts to stick with fiscal rules.
If that’s the macro picture, what about the “everyday economics” of peoples’ lives?
I’d point out two things here. On Wednesday, we will get to see where those £5bn of welfare cuts will fall as the government publishes the impact assessment that it held back last week.
Read more:
Corbyn brands benefit cuts a ‘disgrace’
Expect different focus from Reeves at spring statement
Up to a million people could be affected by cuts, and the reality of who will be hit will pile on the pressure for Labour MPs already uncomfortable with cuts to health and disability benefits.
Please use Chrome browser for a more accessible video player
Benefits cuts explained
The second point is whether the government remains on course to deliver its key pledge to “put more money in the pockets of working people” during this parliament after the Joseph Rowntree Foundation think-tank produced analysis over the weekend saying living standards for all UK families are set to fall by 2030.
The chancellor told my colleague Trevor Phillips on Sunday that she “rejects” the analysis that the average family could be £1,400 worse off by 2030.
But that doesn’t mean that the forecasts published on Wednesday calculating real household disposable income per head won’t make for grim reading as the economic outlook deteriorates.
Nervousness in Labour
Ask around the party, and there is obvious nervousness about how this might land, with a degree of anxiety about the economic outlook and what that has in store for departmental budgets.
But there is recognition too from many MPs that the government has political space afforded by that whopping majority, to make these decisions on spending cuts without too much fallout – for now.
Because while Wednesday will be bad, worse could be yet to come.
Staring down the barrel
The chancellor is staring down the barrel of a possible global trade war that will only serve to create more economic uncertainty, even if the UK is spared from the worst tariffs by President Donald Trump.
The national insurance hike is also set to kick in next month, with employers across the piece sounding the warnings around investment, jobs and growth.
Six months ago, Reeves said she wouldn’t be coming back for more after she announced £40bn in tax rises in that massive first budget.
Six months on she is coming back for more, this time in the form of spending cuts. And in six months’ time, she may well have to come back for more in the form of tax rises or deeper cuts.
The spring statement was meant to be a run-of-the-mill economic update, but it has morphed into much more.
The chancellor now has to make the hard sell from a very hard place, that could soon become even tougher still.
The University of Sussex has been fined £585,000 by the higher education regulator for failing to uphold freedom of speech.
The Office for Students (OfS) criticised the university’s policy statement on transgender and non-binary equality, saying that it could lead staff and students to “self-censor”.
The policy has a requirement to “positively represent trans people” and asserts that “transphobic propaganda [would] not be tolerated”.
Professor Kathleen Stock after being made an OBE for services to higher education. Pic: PA
The university said it will legally challenge the OfS’s decision and accused the regulator of pursuing a “politically motivated” inquiry against it that resulted in “egregious and concocted” findings.
The OfS launched its investigation after campus protests calling for the dismissal of Professor Kathleen Stock.
She left the university in 2021 after being accused of transphobia when she published a book questioning whether gender identity was more “socially significant” than biological sex.
The OfS said the University of Sussex’s policy had a “chilling effect” on Prof Stock’s views.
“Professor Stock said that she became more cautious in her expression of gender critical views as a result of the policy,” the OfS said in a statement.
“There were some views she did not feel able to express, and therefore teach, despite those views being lawful.”
Professor Sasha Roseneil, the vice chancellor at the university, said the OfS findings mean “it is now virtually impossible for universities to prevent abuse, harassment, or bullying on our campuses”.
“Under this ruling, we believe that universities would not be permitted to expect their staff and students to treat each other with civility and respect,” she said.
“The OfS is effectively decreeing libertarian free speech absolutism as the fundamental principle for UK universities. In our view, the OfS is perpetuating the culture wars.”
Prof Roseneil has claimed that the OfS did not interview anyone from the university in its three-and-a-half-year investigation and that the fine is “wholly disproportionate”.
“The behaviour of the OfS sets a dangerous precedent and constitutes serious regulatory overreach in service of a politically motivated inquiry,” she said.
She added that the investigation findings “leave universities unable to have policies to prevent abusive, bullying and harassing speech and that will perpetuate the culture wars”.
The University of Sussex
The OfS was given the power in January to issue fines where freedom of speech was not upheld at a university.
The fine issued to the University of Sussex is the largest-ever issued by the regulator, with the institution saying it’s 15 times larger than any other sanction imposed.
Read more: Controversial free-speech law delayed ‘over anti-semitism fears’
Arif Ahmed, the director for freedom of speech and academic freedom at the OfS, said that the regulator’s probe “also found deficiencies in the University of Sussex’s decision-making process, with decisions about important free speech and equality matters taken by people without the authority to do so”.
“Those decisions may not have been in the best interests of students and staff,” he said.
“Substantial monetary penalties are appropriate for the scale of wrongdoing we have found.”
Bridget Phillipson, the education secretary, said that “free speech and academic freedom are non-negotiables in our universities”.
“If you go to university you must be prepared to have your views challenged, hear contrary opinions and be exposed to uncomfortable truths,” she said.
“We are giving the OfS stronger powers on freedom of speech so students and academics are not muzzled by the chilling effect demonstrated in this case.”
Prince Harry has said he is devastated and “in shock” to have to quit as patron of a charity he set up in honour of his mother.
Sentebale was established in 2006 to help children and young people in southern Africa, particularly those with HIV and Aids.
But the Duke of Sussex said he had been forced to step down amid a battle in the organisation between the chairwoman Dr Sophie Chandauka and the board of trustees.
He released a statement with his co-founder, Prince Seeiso of Lesotho, saying they had established the charity “in honour of our mothers”.
“With heavy hearts, we have resigned from our roles as patrons of the organisation until further notice, in support of and solidarity with the board of trustees who have had to do the same,” they said.
“It is devastating that the relationship between the charity’s trustees and the chair of the board broke down beyond repair, creating an untenable situation.”
Details of the row in the charity are unclear but it is reportedly over a decision to focus fundraising in Africa.
“What’s transpired is unthinkable,” the princes’ statement added.
“We are in shock that we have to do this, but we have a continued responsibility to Sentebale’s beneficiaries, so we will be sharing all of our concerns with the Charity Commission as to how this came about.”
The Duke of Sussex and Sophie Chandauka in Florida last year. Pic: PA
In her own statement, Dr Chandauka said she would not be intimidated, adding: “For me, this is not a vanity project from which I can resign when I am called to account.”
She said she had reported the trustees to the Charity Commission and that a UK court had issued an injunction to stop them removing her.
“There are people in this world who behave as though they are above the law and mistreat people, and then play the victim card and use the very press they disdain to harm people who have the courage to challenge their conduct,” Dr Chandauka said.
She added that this was a “story of a woman who dared to blow the whistle about issues of poor governance, weak executive management, abuse of power, bullying, harassment, misogyny, misogynoir – and the cover-up that ensued”.
Read more from Sky News:
Trump urged to fire defence secretary over war plans leak
Ex-footballer avoids jail for kicking wife in the head
A Charity Commission spokesperson said it is “aware of concerns about the governance of Sentebale”.
“We are assessing the issues to determine the appropriate regulatory steps,” a spokesperson for the commission said in a statement.
Prince Harry was inspired to start the charity after spending two months in Lesotho when he was on a gap year in 2004.
He was in the small African country – which has one of the world’s highest rates of HIV and Aids – as recently as last October.
The prince talked to young people around a campfire about the “massive difference” Sentebale was making. Last April, he was also pictured with Dr Chandauka at a charity polo match in Florida.
Five former trustees also released a statement that said resigning was “devastating” but the “result of our loss in trust and confidence in the chair of the board”.
They said they were forced to quit as they could not allow Sentebale to take on the “legal and financial burden” of a lawsuit brought by the chairwoman “to block us from voting her out after our request for her resignation was rejected”.
They added that the decision to resign was “not a choice willingly made, but rather something we felt forced into in order to look after the charity”.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports12 months agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway