March 3, 2025 - 4:30pm
Today’s latest report from the Confederation of British Industry will do nothing to cheer up Rachel Reeves. The Chancellor of the Exchequer is already under pressure from her own caucus over the spending cuts she’s been forced to make in order to stick to her self-imposed fiscal rules and tax pledges. Her hope for a get-out-of-jail-free card from rising economic growth looks increasingly fanciful, with the CBI reporting that business expectations for the coming quarter are down sharply, driven by weak consumer expectations. All told, the CBI expects private sector activity to fall for yet another quarter.
In other words, the economy continues to bump along bottom with few signs of renewed vigour. If it’s any consolation, Britain is far from alone in its predicament. Few of the developed economies are growing much at all and those which are, such as Greece and Spain, tend to be the countries that took the biggest falls back in the 2011 euro crisis, so to some extent they’re just making up lost ground. As for the supposed star performer of the developed world, the recent growth of the United States has been driven by a surge in debt that has risen faster than the economy itself, a model which has an obvious sell-by date which may arrive soon.
There are still a few glimmers of hope. The CBI report did find that manufacturing is growing. Paradoxically, the threat of a European war, as Donald Trump threatens to withdraw his country’s backstop for the continent’s security, may provide further support to the manufacturing rebound, since orders for guns and ammo are expected to boom. And Britain’s stock market, like those of other European countries, appears to be profiting from the apparent rotation out of US shares, as the American market rally peters out. Whereas the S&P500 index is up by barely a percent since the start of the year, the FTSE100’s gain is now approaching double digits.
Still, it’s hard to see where much future economic growth will come from. As symbolic as manufacturing may be to a country’s sense of productivity, Britain’s is a service economy, and that’s a sector the CBI expects to remain in the doldrums. Meanwhile, although the country’s leading business lobby is consequently calling for more Government action to rev up growth, it’s hard to detect much direction from Downing Street. The Chancellor insists she will stick to her fiscal rules and the ill-advised pledges she made during last year’s election not to raise most taxes.
Her promises to nevertheless boost infrastructure and social spending were already looking financially stretched, and depended on a favourable economic wind which never blew. Since she delivered her autumn Budget, the fiscal backdrop has worsened and the geopolitical environment has grown more fraught, forcing the Prime Minister to pledge an increase in the defence budget — which he said will nonetheless be done without raising spending. While the sums on cutting aid to fund defence just about add up, few see this as a serious long-term solution.
If the Chancellor won’t return to Parliament with a more realistic long-term budget plan, the Prime Minister may eventually have no choice but to replace her. If he doesn’t, and if the Government continues to hope that growth will somehow come riding over the mountain to rescue them, investors and consumers may well decide to keep their wallets closed until a more plausible future appears.
John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a religion (Simon & Schuster, 2017).
jarapley
Suppose that there is nothing the government can do to produce sustainable growth? It may seem unduly pessimistic and it may be unlikely, but it does seem to me to be possible.
In which case we need honesty and a different debate.
Well maintaining taxation at 38% of GDP, marginal rates of income tax at over 50% for many earners, and Corporation Tax at 25%, while imposing an ever growing regulatory burden on business, and paying millions of young and middle aged people to do nothing, certainly doesn’t seem to have done the trick. But it seems a leap to say that there is nothing the government can do.
Well as soon as you cut tax, you have to cut spending. That would be my preference, but it seems to be impossible politically when everyone wants more spending on something whether it’s the NHS, defence or potholes.
And economically, the problem is that cutting spending suppresses growth whatever the spending is on: another bureaucrat doing something pointless is more money going into the economy.
I think we have reached a peak or a plateau in growth and we need to change the terms of the debate.
There is an oddity about the situation in Parliament. Starmer is getting more and more assured. While Reeves is getting stiller and stiller, her face gaunter. She looks like a woman petrified, ossifying before our eyes.
Perhaps she is so far out of her depth that she believes what she often said “what else can we do but raise taxe?”
She is out of options and has been told a train crash event is coming.
But why is Starmer so assured? That’s what I don’t understand.
Because he knows that he has a plausible reason for removing a potential threat to his leadership. Ditto that he’s now got an excuse to dump Millipede and Net Zero.
Trump will veto Chagos (no doubt agreed at his meeting with Starmer) which gives him plausible denial that he’s backing down along with the perfect excuse to get rid of Lammy.
If i was him, I’d be grinning like a Cheshire cat.
Maybe he’ll throw Reeves under the oncoming train and blame the crash on her!
That would be diabolically ruthless.
For me Starmer is walking a fine line between being a leader and a joke.
He’s a barrister.
In court you let the other side make mistakes and then capitalise on them. If you can lead them toward those mistakes by loading the situation
He also shows hints of autistic or sociopathic tendencies which are excellent barrister qualities.
You could be right, in which case he is to some degree living in his own world, and won’t see how ridiculous this can make him seem to the outside world. His performance giving the King’s invitation to Trump, was very close to comedy.
Consolidating his power
and of course when the inevitable arrives and they are held accountable to the electorate for 5 years of economic chaos he will have no one to offload the blame to-should be fun to watch him squirm.
Because methinks that strutting about the world stage gives him credibility among the elites who think they rule the world, he’s so much happier Devos.
Few things that are still going for UK:
– English language
– Excellent universities (which are in the process of drowning from Woke ideological capture)
– European time zone and location
– What remains of finance
– Military/cyber/intelligence capabilities
So, things I can imagine a Labour government doing to boost economy:
– Stop actively making legislation changes that sabotage business/productive activity
– Halt and reverse Woke invasion and save the universities
– Open up to skilled migration from Europe/India/wherever to provide (cheaper) workforce for American corps
– Stop illegal immigration and make publicly a big deal out of it in deporting criminals, Islamist terrorists/radicals etc. (mainly to enable the former)
– Extract whatever rent possible from vassal status/special relation with US within Europe e.g. contribute to (a possible) European military/cybersecurity/intelligence in exchange for preferred access such as for financial markets
Labours current policy, or set of policies, will run the UK into the ground. Reeves is out of her depth, the budget was a disaster: high taxes, massive legislative burdens and increased state spending have never, nor will ever, deliver economic growth. Rayners youth and housing schemes are also doomed, and Streeting isn’t going to deliver on the NHS, and Milligan’s net zero nonsense with push energy costs to eye watering heights. Starmers main strategy seems to be avoiding the flack of his lieutenants failures, allowing them to hang themselves whilst he floats above it all, and adroitly shifting course so that they get sunk in the wake, see Annilese Dodds and the cutting of overseas aid. This may rid him of potential rivals but ultimately he will also fail because the only thing labour will deliver is recession and decline.
Neither has Rachel-From-Accounts got answer for her CV and other lies!
The solution may well be to sell off the NHS as free healthcare is the greatest draw to mass, low-skill immigration which is exerting a high per capita cost. Create a healthcare market and focus on R&D for military development and high-end IT while using the rest of the revenue to cut taxes on small and medium-sized businesses which are the main hirers.
Britain must become a manufacturing country again.
Unlikely with the highest energy costs in the ‘developed’ world!
They have an “oven ready” solution. It’s their only one and it comes courtesy of Brexit. Deliciously ironic, of course.
Tariffs on the EU with an exemption for the UK, is macroeconomic nitroglycerin. Starmer must secure it. If he fails to, Reeves is toast.