The Week 25 October 2024
Director
It is the week before the Budget, and all eyes are on what the Chancellor is going to do.
Fiscal statements are always big events in Westminster, but this one represents a bigger moment than usual. The first of a new Government who to date have given us little by way of tangible policy (though a lot of reviews, we were totting them all up in Re:State Towers earlier this week, and it took a while). Arguably the Budget should have come earlier: a vacuum having been left, the stakes are now that bit higher.
The context: the 2025 departmental budgets pencilled in by the last Government are pie in the sky, baking in significant cuts at a time when public services are buckling and demand is rising (and public satisfaction has cratered). Debt to GDP is almost 100%. Last month the Government borrowed £16.6 billion, meaning that borrowing is £6.6 billion above OBR projections for the year so far. The black hole Labour say they need to fill has expanded from £22 billion to £40 billion. And, unhelpfully when growth is your lodestar, today is was reported that consumer confidence has dropped to its lowest level this year. Business confidence has similarly fallen, reported earlier in the week.
We will have to wait to see which of the possible Budget measures trailed in recent weeks make it into the red book, but one thing we did get confirmation of: Labour are changing their fiscal rules to allow for more borrowing for capital investment. This is good. Investment in the UK, both public and private is poor and urgently needs redress. Of course increased public investment in infrastructure is only a good thing if we spend it better, and seriously overhaul how we deliver it (see my recommended read of the week!).
As Robert Shrimsley writes in his FT oped today: “You have only one or possibly two Budgets to set a clear course. Sweeping reforms and capital investment take years to deliver any effect”. Or in other words, be bold, inflict the pain early, take the flack — if Labour are to deliver the change they have promised the country, this is the minimum they must do.
Look out for our usual on the day snap analysis.
My recommended read of the week…
Continuing the theme of ‘Britain desperately needs big investment’, Sam Dumitriu’s latest Substack is on ‘how red tape holds back nuclear power’. It’s a fascinating read that — a big must for me — takes us from the depressing state of things to specific, tangible, quickly delivered ideas for how to make things better.
We all know energy costs in this country are higher than comparable nations (”British businesses pay more for power than anyone else in the world”), which is a big drag on growth. Sam also reminds us that if we’re going to achieve AI superpower status, we’re going to need to be able to feed this “power-hungry technology”. I didn’t know that AI companies are in are in fact investing in nuclear for this reason. The problem is that “Britain is the most expensive place to build a nuclear power station in the world”. Ouch. Sam points to numerous reasons that this is the case, but zooms in on a particular, non-sensical regulatory barrier… which “could be fixed by Christmas”. That’s exactly the sort of thing the Government should be prioritising. Paging Steve Reed. (You’ll have to read the piece to find out why it’s a job for the DEFRA secretary and not Ed Miliband at DESNZ).