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The chancellor’s update on the economy next week is not going to be an emergency budget in its truest sense. But it will be a moment when the sirens flash red.
It’s not an emergency budget because the chancellor, as our listeners will know from our interview with Rachel Reeves on Electoral Dysfunction a couple of weeks ago, is not going to make tax changes (such a move would tip it into budget territory because it would turn the spring statement into a major fiscal event).
But it looks set to be a red siren moment for a chancellor. Having staked her reputation on growing the economy and no return to austerity, she is going to have to announce a downgrade to growth forecasts and could also unveil the biggest spending squeeze on Whitehall in years.
The welfare cuts this week were just the starter – the opposition are going to have a field day.
Watch out in the next few days for a “re-education” as the Treasury tries to frame the arguments Reeves will get in at the despatch box on Wednesday.
You’ll hear about how the “world has changed”, with global uncertainly knocking growth and forcing countries to invest more in defence.
This is all part of the chancellor seeking to distance sluggish growth from her own budget decisions last October (the Conservatives will shout back jobs tax – their rebranding of the Reeves’ £25bn hike in employers’ national insurance contributions).
You will also be hearing more about the need to go “further and faster” on the economy (the bonfire of quangos, planning rules, regulations and drive for ‘efficiency savings’).
But whatever arguments she makes ahead of time won’t dent the sharp inhalation of breath as growth is downgraded and the chancellor outlines what’s likely to be billions in cuts to the departmental budgets in an effort to plug the black hole in the public finances that has emerged from slower growth and rising debt repayments.
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