OBR personnel are currently before the Commons Treasury Select Committee to answer questions about their budget forecast. Labour MP Jeevun Sandher, who was busy parroting Labour budget lines on the airwaves last week, was confused that Reeves’ injection of £22.6 billion extra to the NHS won’t boost potential output. He claimed that output was revised down under the Tories thanks to ‘declining public health’ and complained that the OBR doesn’t think extra cash will now help…
OBR Chairman Richard Hughes slapped Sandher down:
“Myself and my predecessors have revised down our views of potential output pretty steadily since the aftermath of the financial crisis. Every country in the world has suffered a big hit to potential output, including those like the US who’ve continue to spend lots and lots of money on healthcare. The idea that there’s a direct link between how much are spending on healthcare and the potential output of the country is not demonstrated by the data.”
That is – chucking more money for day-to-day NHS spending won’t help growth. Hughes also pointed out no further plan has been spelt out by the Treasury: “We know very little about what the government’s plans are for healthcare spending after.“ So much for “Reform or die“…
At the same time MPs were shocked that it would only take a 0.3% increase in interest rates to entirely wipe out Reeves’ “fiscal headroom.” It’s not just the gilt market coming to terms with the scale of Reeves’ spending…
“A 1.3% increase in the interest rate… that actually results in the current balance in five years being in deficit by £11 billion, so you’re actually missing the rule by £11 billion… To get the current balance down to essentially zero so to take away all the current headroom, we have point three.“
The budget has already prevented faster interest rate cuts according to economists and boosted future inflation. Reeves’ pretend “fiscal stability” is a house of cards…
Speaking to Sky News off the back of Rachel Reeves’ Air Passenger Duty hike, Ryanair chief executive Michael O’Leary said:
“Labour is dependent on those Red Wall seats, and yet every move she makes poisons economic growth and damages the UK’s recovery… it’s the Chancellor who stumbles from policy misstep to policy misstep… I think her policy decisions are incredibly stupid.”