It was Liam Byrne Chief Secretary for the outgoing Labour government in 2019, who penned the note for his successor to say "I'm afraid there is no money". Byrne came to regret the comment, which he described as stupid and offensive. Offensive to the millions of people who had made sacrifices to achieve the budget cuts. Stupid because it became easy for Labour opponents to bash the economic mess inherited.
Perhaps the comment was not quite as offensive as that made by the Tory Chancellor Reggie Maudling, who bounced down the steps of the Treasury in 1964 to tell Jim Callaghan, "Sorry to leave it in such a mess, old cock."
Jeremy Hunt has wasted no time in advising there is no money for tax cuts in the forthcoming Autumn statement. Perhaps little chance of tax cuts in the Spring either, which will be the last budget before the 2024 election.
The IFS have made it quite clear, the economy is in a bit of a mess "Old Cock". "We are in a horrible fiscal bind as low growth and high debt interest payments mean there is no room for manoeuvre."
"The UK economy remains stuck between weak growth on the one hand and the risk of persistently high inflation on the other. An ill-timed fiscal loosening, such as an unfunded package of pre-election tax cuts might give a short-term economic sugar rush, but could prove unsustainable. This could lead to a protracted recession as interest rates rise even further to bring inflation back under control.
The state of the public finances also undermines the case for net tax cuts any time soon. The Chancellor is in a terrible bind, as will be whoever is Chancellor after the general election. Poor growth and very high spending on debt interest over the next few years mean that the national debt is stuck at close to 100% of national income.
In the first six months of the year, Public Sector Borrowing was £81.7 billion. That's £15.3 billion up on prior year, an increase of 23%. In the full year, 2022/23, borrowing was £128.3 billion. Pro rata the government is set to borrow over £150 billion this year [in line with OBR forecasts]. Total debt has risen to £2.6 trillion, 97.8% of GDP.
Political pressure are rising, especially following the bye election results this month. Jeremy Hunt may well caution, "I'm afraid there is no money." The response may well be, "Well just print some more then anyway. We can sort the mess out later ...
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy.
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