It might not have been a budget, but the spring statement felt like one.
There was red pen all over the chancellor’s economic plans as Rachel Reeves sought to repair deteriorating public finances by cuts that will hit the poorest in society.
Faced with a deteriorating economic outlook and rising debt repayment costs, the chancellor was in a tight spot having made her big call back in October when she executed a – her words – “once in a generation” £70bn tax and spend budget to improve public services and drive economic growth.
Five months in, the budget is not living up to what was billed.
She confirmed on Wednesday that the £9.9bn surplus forecast in 2029/30 had been wiped out, leaving the public finances in the red.
Cue a £14bn repair job to restore her fiscal cushion as Reeves told the House of Commons her fiscal rule to fund day-to-day government spending from tax receipts not borrowing by the end of the decade was “non-negotiable”.
No more borrowing and no more tax hikes (for now).
After chancellor’s spring statement we end more or less where we began
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The chancellor instead announced billions of spending cuts to make her sums add up and the cuts were hard to stomach for the Labour movement as they watched a Labour chancellor cut the welfare bill by £4.8bn.
The government’s own assessments estimate that 3.2m families on universal credit will be on average £1,720 worse off a year by 2029/30 while 250,000 adults and 50,000 more children are set to be pushed into relative poverty, according to the government’s own impact assessment.
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I don’t need to tell you how uncomfortable this is for many Labour MPs and the clamour against cuts was plain to see, not only in the Commons as MPs stood up to rail against “cruel cuts” and urge the chancellor to think again, but outside Downing Street too as protesters gathered.
For now, MPs, and government insiders, tell me they don’t scent a full-blown rebellion. One seasoned MP told me that while MPs are very concerned about how these cuts will be implemented and reaction from constituents, they also “generally still recognise the tough circumstances” with “no one in doubt Rachel Reeves is serious about turning around public finances”.
Government figures argue they do not think the fall-out from the cuts will be as bad as their own assessment, pointing out that the calculations don’t take into account the rise in national living wage, the government’s poverty plan for around 700,000 vulnerable families and changes to employment support as part of the welfare reform that should help people back into work.
But that does not mean the difficulties are not piling up for this chancellor even if on Wednesday she managed to buy a bit of political space as she repaired her black hole, avoided an emergency budget and could at least point to upgrades to the growth forecasts after 2026.
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After the spring statement we end more or less where we began
There was also a rabbit of sorts – the chancellor looks very happy about this – as she announced that the government’s planning reforms would add nearly £7bn to the economy over the next five years.
This is something to grasp on to for a politician groping around for a bit of good news and something to sell to her MPs: Stick with me the growth plan is going to work.
But what is plain to see is that this is a repair job rather than a fix.
As the Office of Budget Responsibility itself noted, the £9.9bn headroom Reeves has re-built to stick to her fiscal rules is flimsy and fragile and could easily be wiped out by trade wars, an interest rate shock or market volatility in these deeply uncertain times.
So, the question on everyone’s lips is will she have to come back for more in a few months? When I asked her at this afternoon’s press conference, she said only that the government was, as demonstrated on Wednesday, “determined to live within its means”.
But it’s obvious that further tax rises or spending cuts could soon be on the cards if she remains determined to stick to her fiscal rules and not borrow more.
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What is clear too is that the appetite for further spending cuts from her own party is pretty much exhausted.
Labour MPs were vocal about that in the chamber, demanding taxes on the rich rather than benefits cuts on the poor, while those who are sticking with the chancellor now also know all too well that pressure will build to raise revenue elsewhere.
The chancellor may have managed to navigate a difficult day, but the months ahead look set to become harder still. The difficult decisions now could be just the start.
