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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Rachel Reeves’ Spring Statement took place in the shadow of one set of figures — the UK’s worsening economic backdrop and, with it, the deterioration in the public finances. But another figure tells the biggest story: the 0.4 per cent that the Office for Budget Responsibility estimates the government’s planning reforms will add to the UK’s GDP.
It’s the largest boost the OBR has ever attributed to a single policy — and without it costing the government a penny. This is by any measure a big achievement if they pull it off. But the problem is that it is also small beer in terms of both the size of the British economy and the scale of the hole the UK finds itself in.
While some of the government’s problems are of their own making, ministers are not wrong to decry their inheritance. They took office with an economy in worse shape than the one Gordon Brown bequeathed to David Cameron in 2010 and a public realm in direr straits than that inherited by Tony Blair from John Major. The UK’s economic model, already in big trouble following the financial crisis, suffered a further blow after leaving the EU. The country is close to completing its second lost decade of flat to non-existent economic growth.
Given all that, managing to do anything that may add to GDP is welcome. But we are not talking about something that will get the country, or the government, off the hook for the increasingly painful zero-sum games that have made British politics so volatile and acrimonious. Planning reform and a willingness to cut through local objections to building things are good, but not quite enough to escape another, even more difficult fiscal event in the autumn, or to avoid a summer of cabinet rows over departmental spending.
Labour’s fear will be that, in the end, “not quite enough” will be the government’s epitaph. Not quite enough movement on supply side measures to get the UK out of its low-growth trap. Not quite enough courage on repairing the relationship with the EU to unlock more growth by that route. Not quite enough public spending to turn around the public realm, and not quite enough restraint on tax rises for households not to feel the pinch.
Not quite enough regulatory reform to help out employers struggling with the additional costs imposed by the government’s sweeping changes to the labour market, while at the same time, not quite enough of an upside for employees to feel well-disposed to the government. Not quite enough defence spending to keep the UK and its allies safe. And not quite enough on Labour’s traditional preoccupations of fighting poverty at home or abroad to convince its core voters that this is a government worth fighting for.
Where Reeves can console herself is that she appears to have done “quite enough” to reassure markets. This was not an emergency Budget, which is one reason why tax rises were not part of the response. But Reeves did enough to avoid having to hold an emergency Budget, assuming that the various geopolitical crises the government faces do not force her hand. Still, she has much left to do in the autumn if she is to avoid this government going down in history as one that did not quite enough to avoid being an awkward interregnum between those of Rishi Sunak and Nigel Farage.
