Spring Statement: Nothing Revolutionary, Just Fiscal Reality
Bits and pieces of the Spring Statement seemed almost textbook. From October onward, the cost of paying the debt blew up, and the economy stopped growing like a bubble pop—no smoothie there.
Fiscal Position in Sickness
Higher spending and lower receipts nipped our fiscal health. Reeves had to crunch numbers and pull the fiscal rules on the table to bring things back in line.
The Fix: Cutting Welfare & Dept. Spend
- Welfare – let’s trim the bottom line.
- Department budgets – tighten the belt.
That plan had already leaked to the press. It’s a classic “kick the can down the road” move: survive until October, then decide whether tax hikes become unavoidable.
Could She Flip the Fiscal Rules?
She can’t overthrow the rules now; that would wreck her credibility with gilt investors. Chancellors straight up fear a market loss of confidence these days.
Waiting on Taxes?
It’s also too early to raise taxes again—breaking a promise and coming after a last round of hikes that slowed growth right from the start. This autumn, she’s unlikely to get away with it.
Long-Term Headwinds
Demographics and defence spend are only going to get fiercer. The OBR’s growth projections might still be fat yet—half among half, but still optimistic. Add a U.S. president reshuffling global trade, and the risk of a shock gets taller. Tough decisions lie ahead.
Sterling’s Tale of Survival
By 0.4% on a softer inflation report, sterling dodged the sell‑off seen elsewhere since October. To keep foreign investors happy, Reeves needed to avoid:
- “Too high or untrustworthy” issuance.
- The fear that hitting fiscal rules could trap growth and pull the Treasury deeper away from those rules.
And, oh, she didn’t quite fail. Gilt issuance for 25‑26 is slightly lower than expected, helping keep yields in check despite a bit of choppiness. Some twitchiness still possible—watch this space.
