The Chancellor set about spending with rare enthusiasm as she pandered to her Labour MP audience. In a heavily party drenched presentation she played fairy godmother giving out public sector sweeties to as many named MP s, public sector trade unions and client groups as she could cram in . A bloated state was put on a fattening diet.
Every part of the public sector mentioned was praised for its employees and achievements. Every part had according to Reeves been starved of money by the previous governments which had put up public spending every year. Not once did she mention the productivity collapse, the staggering losses of the nationalised industries, the huge cost overruns of many public sector projects. This was fantasy economics.
We are asked to believe they will build nuclear power stations on time and to budget, yet we are not told what either the cost or the timetable will be. We are asked to believe the newly nationalised railway will run to time and not send supplementary bills. We are told British steel is saved without being told how we replace the blast furnaces, square the Chinese owners and avoid all the US tariffs. We are asked to believe that re announcing tram and rail projects long in the pipeline will revive city centres and solve problems of urban decline.
There was no mention that longer term interest rates are way above Truss levels, that markets think the government is borrowing too much, or that the small increases in spend for the last two years look implausible under a spendthrift government wanting to be re elected. This Chancellor invented a black hole then set about digging a much bigger one.
PS The document issued after the speech promises 5% savings from efficiency improvements based on a £3 bn Transformation Fund to spend more on computing. This does not even remove all the lost productivity since 2019. There are targets to reduce administrative costs without explaining how.
June 12, 2025
Good morning.
Or she knows that the Pension Funds are going to be rinsed – Again !
June 12, 2025
Spend unproductively, tax and spin. It is not going to work, is it?
Starmer must know his own fate depends upon replacing Wrecker Reeves with someone with nous who can retain the confidence of markets.
June 13, 2025
Who would that be? I can’t identify a single Labour MP who qualifies: they’re all Public Sector / Charity Sector goons who only know how to spend and waste other people’s money.
June 12, 2025
As you say, fantasy economics. She expects a growth rate of 2.5% the only real growth seems to be unemployment and immigration. Hotels for channel invaders will not be used by the end of Parliament saving £3 billion. Are they to get the houses being built.
Money is allocated for the Carbon Capture which will consume large amounts of energy which we don’t have and will make not one iota of difference.
The new nuclear age milibrains bangs on about won’t even replace redundant equipment let alone power all his EVs and heat pumps
Surely it can’t be long before the bond vigilantes put an end to this nonesense.
June 12, 2025
Ian
Guido suggests yes they will not rent rooms because the government is actually buying up hotels, thus promise kept, no more renting !!!!
June 12, 2025
Fantasy econonics by Rachael from accounte/ complaints. As you say a political statement not a financial one. With luck it will bury labours socialism, and all those who for the last twenty eight years have sailed with it, for an eternity.
June 12, 2025
On the front page of the Daily Mail, Andrew Neill is quoted as calling it “delusional drivel”. Watching the proceedings live was a dispiriting experience. No wonder the UK’s finances are in a death spiral. This collection of MPs are simply not up to the job. It will need an extreme, external force to bring them to their senses. The question is which comes first, bond vigilantes or disgruntled voters?
June 12, 2025
Good Morning,
‘Fantasy economics’ indeed.
Yesterday was an exposition in what is wrong with our Parliament. We had PMQ’s in which the PM gives no answers, followed by the Nations Finance Minister telling her braying supporters she’s going to restructure the economy with massive spending initiatives – without saying how she will fund it. Imagine a finance director doing that at an AGM.
Our Parliament is what’s wrong with this Nation – it is peopled by mostly pretenders and third rate actors. There is so little competence for the job in hand. It has become a dark pantomime where people speak their lines written for them by a unseen gigantic service that appears unaccountable and unassailable.
I fear disaster awaits us.
June 12, 2025
But Sir John, this isn’t spending… it’s INVESTING.
As if that suddenly makes it magical worthwhile activity.
June 12, 2025
This is what happens when a so called leader with no fiscal or commercial management experience, chooses to put people in powerful positions, who are likewise as ignorant to the commercial and financial World as they are themselves.
Fantasy policies and ideas based on political envy and idealism, at the cost of the real workers, stivers, and investors of this World.
They say they want to make work pay, but then bring out polices and taxes that will do the opposite, because they do not have a clue about human nature.
June 12, 2025
The Tories didn’t have the political courage to take on the public sector despite knowing and complaining on under performance and purportedly being the party of efficiency/low taxes etc.
Some of Reeves spending was ‘long grass’ Tory commitment and much of the rest is a future political wish list.
Given the history of large projects, HS2 (Tory) current nuclear (Tory) Umpteen defence projects (Tory) overspends criticising Labour is pots and kettles.
Yet again we get the ‘what’ lists, I suspect we will see more attached to your post, and I agree but useless without the how and to date the Tories haven’t come up with any answers.
Consequently events like yesterday are taken as political stunts and largely ignored.
Migration remains the big issue and at a personal level Council Tax and services and other general taxation will in the main define a party’s popularity.
June 13, 2025
A simple question for our politicians – would our public services be better if they served fewer people?
If the answer to that is yes then we need to concentrate on raising the similar revenues from fewer people to create a surplus. Getting more people off benefits by reducing the attraction and into work by increasing the need to earn would achieve this while cutting the cost of benefits.
June 12, 2025
That’s a big bet on growth having taxed a regulated business into decline. Is that overall growth while we fill up the 1.5 million new houses or per capita so we actually feel better off instead of like hamsters on the wheel.
The BBC is pushing a strategic narrative thins morning which is evidently what the Labour spin doctors are pushing. I don’t think there is anything strategic in it at all. Start by giving health more money than it deserves, add in defence, transport, nuclear and education and our union paymasters, then play with the spreadsheet until the numbers balance. We can raise taxes later if the revenue doesn’t arrive.
Then put together a speech that tells everyone how clever we are while attacking our opponents and hope the markets buy it.
June 12, 2025
Clearly her audience is not those that pay her wages and pick up the bills for her ineptitude.
It doesn’t matter what any of us on our Hosts splendid site thinks, she is marching to a different beat and a different audience to those that work hard and create the way forward for the country not for just ourselves but those around us.
Our Chancellor will keep contriving more ways to tax more to remove money from the economy so squeezing until there is nothing left to squeeze. Money is a commodity that has to be earned, it’s a resource that feeds itself the seed-corn of growth, removing it and you remove tomorrow.
Governments can only get more money if wealth to tax is created, that requires Government to work with the people. Something that has disappeared from common-sense in Government, Parliament the Legislators of this Nation
Yesterday’s speech was electioneering vote me in in 2029 and I will promise you, as nothing is to happen before then.
June 12, 2025
In the UK, 6.1 million people are employed by the Taxpayer directly. This is about 18.1% of the work force, Labours embedded vote in elections
June 12, 2025
Plus all those who live on benefits – I.e off the taxpayer too. It’s a huge majority.
Can’t go on.
June 12, 2025
It really feels like we’re living in Ga Ga land!
June 12, 2025
Where was the mention of food security for the future which has been all but forgotten since Brexit. No mention of farming or fishing which are basic requirements of this nation I would have thought. You can have all the power stations and computers you like but if you have no food you are done for.
June 12, 2025
What a mess, it will take a generation at least to correct.
Sad to see our country ruined by such hopeless amateurs
June 12, 2025
Not announced but reduction in DEFRA budget of 2.7%
Rachel Reeves husband (formerly as Group CEO of Defra ) now seconded to Blavatnik School of Government., Oxford.
June 12, 2025
I watched Reeves yesterday with a growing sense of unease. Something will have to break before too long with these clowns at the wheel. Unlike the really Wealthy, I can’t simply up and leave and nor can my family. So I spent the day thinking about where this is all leading and what (further) I can do about it and it’s difficult…
June 12, 2025
Every Labour government since WW2 has wrecked the economy. Here we go again.
June 12, 2025
Every socialist government – don’t forget the Johnson Government.
June 12, 2025
Indeed mad doom loop anti-growth and net zero lunacy from Reeves and Starmer. But then under BORIS AND SUNAK we had insane borrowing for insane Covid lockdowns and net huge harm Covid vaccines plus net zero lunacy for them and May and Cameron!
June 12, 2025
We cannot tax and spend our way to prosperity said Reeves in her spring statement yet that is exactly what she is absurdly trying to do. With net zero lunacy and open door immigration costs and Chagos costs on top to make it even more insane!
June 12, 2025
No she knows she is not going to get to ‘prosperity’. She is just taxing and spending her way to hell.
June 12, 2025
More smoke and mirrors….
Exactly.
There was no real indication of where all this funny money is coming from to pay this debt we are rolling up – Unless the money tree has suddenly burst into bloom the only way we can afford this excessively expensive chancellor is to grow our export trade 100% – but that’s not going to happen with blackouts on the horizon.
She will of course continue to punish those that don’t have very much to start with by increasing taxation just to show she is in charge, demanding that ‘we do our bit’ to keep the country solvent. Ha!
With her fairy tale assessments and pointless budgets, vindictive tax attacks on us all and an ever increasing debt, we will no doubt welcome a war with Russia to distract our attention from our economic melt down.
2038 will come all too soon.
June 12, 2025
Well done Sir John for accurately explaining what many in the Private Sector would never have believed to hear from any credible politician let alone the Chancellor who is absolutely key with responsibility for Britain’s wealth, security and ultimately it’s future.
This individual is totally unsuitable and unqualified for this both by her inexperience and most importantly the attitudes displayed by her track record. The lack of awareness and emotional intelligence defies belief.
All the signs of a classic “Executive tap dancer” are here, which many people are not trained to see, until it is too late.
Shallow thinking doesn’t explain it and we need rigour and proven track records experience for this seriously important Chancellor role.
June 12, 2025
The Treasury’s Spending Review states: “The Plan for Change also set out the government’s mission to deliver clean power by 2030 and accelerate to net zero.” Socialism, or should I say, Marxism, depends upon making and keeping people poor and the Net Zero Strategy, is designed to do just that. The science is clear. There is no climate emergency and CO2 does not cause global warming. Even the IPCC (WG1 Table 12 in Chaper 12) can find no signals for climate change (precipitation, droughts and storms) other than some mild warming (0.14 degrees C per decade according to UAH satellite data) and in the same report can only invent a warming of a mere 1.2 degrees C for a doubling of CO2 (footnote P95).
June 12, 2025
PS: According to the Natural History Museum the planet was so warm 125,000 years ago that “hippos wallowed in the River Thames and lions prowled where Trafalgar Square now stands.” It is clear that this much higher temperature than today did not lead to runaway boiling and the extinction of the planet as claimed by the climate alarmists for a temperature increase of just 1.5 degrees C above pre-industrial levels, a time which coincided with the Little Ice Age. The planet then cooled into an ice age which ended about 11,000 years ago. There have even been periods when the temprature has been higher since exiting the last ice age as evidenced by receding glaciers in BC/Canada revealing 7000 year old tree stumps. There is no CO2 explanation for any of these temperature changes let alone an anthropogenic CO2 explanation.
June 12, 2025
Office for National Statistics – the UK economy contracted by 0.3% in April. That brings up the defence spending question of 2% or even 5% of GDP. Easily met with a decline in GDP, expenditure should match the duty that the UK Legislator should spend to achieve our safety and security – not its GDP.
As we know Labour with the support of the majority in the UK’s Legislator, HoC & HOL are against a UK surviving. Is it Brexit punishment or the will of the Socialist WEF they all support? What it is not is an establishment doing its duty, a ruling class working with the people, they just keep up the fight against the UK.
We know tomorrow we will be have a debt we cant fund, but we could also not exist a sovereign democracy while this fight goes on from above
June 12, 2025
Indeed mad doom loop anti-growth and net zero lunacy from Reeves and Starmer. But then under BORIS AND SUNAK we had insane borrowing for insane Covid lockdowns and net huge harm Covid vaccines plus net zero lunacy for them and May and Cameron!
David Starkey says Reeves thinks can can have growth just by doing a rain dance saying growth,growth growth while pushing policies that are anti-growth in every single way!
June 12, 2025
The egregious nature of Wrecker Reeves borrowing is shown surely by the extent of the divergence from EU rules (Stability and Growth Pact) with 2024/5 new borrowing at c. 5.3 per cent. of GDP, a deficit level well above those rules that allow for only 3 per cent. maximum. Some hard choices to be made before re-applying to join again!
June 12, 2025
Indeed so Sir John,
It is such a pity that the previous Conservative Government spent more time arguing amongst itself about the EU – with the remainers in it trying to do what Starmer has now done. This left no time for any insight in to what was needed to grow our economy – in particular cheap energy.
June 12, 2025
Reeves comes across as an enthusiastic economics student who has failed to understand the basics of the subject.
Earlier I saw Sir Kier answering a question about his incomprehensible Chagos sell out. Again he said that all of our partners agreed with it [without having to pay for it] but China and Russia were against it. This despite it being in China’s interest and their ambassador congratulating Mauritius. He doesn’t even understand when he is lying.
June 12, 2025
Unfortunately a significant course change will probably only start when the crisis becomes tangible to many people. Avoiding the crisis in the first place seems mostly off the agenda.
The only good things on the agenda, but seemingly paid not much more than lip service, is a need for growth (which most measures of this government seem to go against) and a need to simplify and much reduce the costs of getting things done. An alternative, achievable and serious way of delivering these and much more is required.
June 12, 2025
How do the spending commitments from Reeves compare to the few announcements by Truss in the six weeks she was in office? Why aren’t the financial markets reacting now? Most of her time in office was deflected on the loss of our dear Queen Elizabeth. Backbench tories immediately stabbed her even though they were the ones putting her up to the members as a choice and she openly said in the summer before her election she would challenge the economic orthodxy she won with 57%.
What do the Central Bank who had such a hand in Truss’ downfall say about Reeves splashing money around on the union sector or is it ok because they’re public servants and want a rise? We were told Truss gave £45bn of tax cuts in her plan to boost spending and growth, the accusation was that there wasn’t an assessment of how her government would pay for them. The claim was the announcement took the financial markets by surprise – why did it she announced it before her election. She got punished for doing what she said she would. I repeat, she was the choice given to the membership. Her biggest mistake was not using an experienced chancellor, which JR would have been, to make her announcements in a manner the economic institutions would accept.
So where is the assessment now of how Reeves government will pay for all the largess. Starmer is talking of spending the VAT from school fees on several different projects at once, yet some economists say that after 13000 children leaving the private sector many heading to the State school system her gains won’t be as high as predicted.
Reply The gilt market has cut prices and raised yields much more on gilts than the worst day under Truss.So they should as Reckless Rachel is borrowing far more without the tax cuts which would have boosted growth if they had remained.
June 12, 2025
The spending statement from Reeves is a joke. There must now be serious doubts about the mental health of the Chancellor, the PM and the Cabinet. They are deluded about the effect of debt on the UK economy, and are headed for another financial crisis. I note that we now have 550,000 civil servants. What do they do all day? Spending on Government Credit Cards has gone up, not down as promised. There is no attempt to cut spending, repay debt or live within our means. I guarantee they don’t manage their personal finances the way they manage the UKs!
The UK economy will stagnate, debt will go up, and interest payments will go up. We are headed for another dose of real austerity enforced by the IMF.
June 12, 2025
The mistakes, if you believe in a market economy, are so obvious, and the appeals for growth so contradicted by current policies, that it is hard to believe that what is being done is not malevolent.
June 13, 2025
+1
June 12, 2025
Most of the western countries will default on there debt and obligations to there people.
June 12, 2025
Chancellor is a bit crafty. Hand out a lot of goodies now so that she won’t be fired until after announcing large tax rises in the Autumn. It gives her another 6 months in the job.
June 12, 2025
GREED.
Some rich greedy for money without the work ethic
Some poor greedy for money looking for hand outs
Until we return to trad Christian values of work ethic + humour = being a lot more happy and fulfilled.
(Greed destroys humour – people now much less humorous than they were 50 years ago – both rich and poor alike)
June 12, 2025
Basically
Givers & Takers, more takers = less economic growth and vice versa.
More Tax less giving = Taken by Govt.
Double whammy.
June 13, 2025
I agree.
And let’s be clear, high tax is a killer. And wrong.
But we rich (and I include myself) are also at fault (all classes – in some shape or form).
And I’m not condemning anyone. But more a case of challenging each other so we can do better for ourselves – but also for our country!
June 12, 2025
The dominoes have been lined up by Labour and are beginning to topple. The Chancellor continues to pay off the unproductive public sector, suffering the illusion that more public spending boosts the economy. It invariably increases the debt.
Outside political loyalties, which are very fluid at the moment, people are beginning to react. They are reacting for their own survival. The billionaires, millionaires, and so many with entrepreneurial skills are relocating to ensure survival. Government remains blinkered. At the other end of the population, the genetical fire bombers rampage in NI. I share their disgust, but deplore their reaction to government blind stupidity.
It is all down to the current government having no idea of how to run the country or manage the economy. It shows on the faces of the cabinet line up in the Commons. None of them are minded to take the steps required, be it with the economy, immigration, energy, or the running of public services, even assuming any of them have a clue as to what is needed.
Grasping at the dishonest fantasy of previous government’s black holes, Trump duty erratica, or any other “ leaves on the line”, are no excuse for incompetence or negative political zealotry. We enjoy front seats at the implosion of government.
June 12, 2025
She keeps on talking about a supposed £22bn black hole left by the Tories, but this government has added £118bn to the public debt since they came into office until April. No doubt May and June’s figures will add more when they are announced.
So what kind of black hole are we talking about now? 5 times as much as she claims she has inherited.
I am surprised not to see a tick up in yields on UK gilts, but are we expecting that to come soon?
Looking at auctions of UK gilts, we seem to be selling debt below value recently. Maybe what the government should do is brick up the Debt Management Office and live within its means, all the while the debt interest is way too high.
June 12, 2025
Dear Sir John,
Trend growth in gdp per head has been falling since about 1990, as process and manufacturing industries have been run down. It is now probably less than 1 per cent a year. The Treasury used to assume that the rise in GDP from immigration would be higher than the ensuing extra cost of public services, but this is no longer the case as we have to catch up on schools, hospitals, GPs and law&order.
Public spending should therefore focus on top priorities now at the cost of staying good things that are less urgent, especially as our defences are now in need of urgent repair for other reasons.
As usual, it turns out that the NHS (the real fiscal black hole) is still the top priority. Yet our Government thinks we can afford lots of other extras as well, along with lots more growth-sapping regulation for almost any sector except planning. And if Ben Wallace is right, even the modest rise in defence spending is largely window-dressing.
Hardly any of the planned capital spending will generate direct revenue to pay for itself so the burden is yet again to be borne by more anti-growth taxes or an ever-rising interest burden on the next generation.
June 12, 2025
400 criminals were assisted into the UK yesterday; and escorted from the safe country of France…
June 12, 2025
gc : You have to wonder why our Civil Service wants these criminals in the UK….
June 12, 2025
Of course Reeves’ huge extra spending on the public sector won’t work and is idiotic.
Of course Sir John Redwood’s observations here are correct.
So why do Reeves and Starmer get away with it? In part because left wing and many centrist people hate profits (except any they may themselves make) and think not for profit entities are therefore definitionally virtuous. In part because supposedly right of centre politicians claim that though such expenditure might be unaffordable right now it is virtuous in principle – no real opposition.
Why won’t somebody (myself apart in the U.K.) say public spending does not provide value for money, inherently cannot (as people generally won’t work well without considerable personal incentive) in the long term be managed to provide value for money. It should therefore be minimised to what absolutely must be done (e.g. Defence; police; basic pensions and financing, not operating some health and some education provision) by the public sector.
Most things should be in the private sector and taxes, especially business taxes and Income Tax should be slashed, or better still be abolished.
June 12, 2025
Our only hope is a qualified franchise. Everybody loses their vote unless HMRC confirms that they contribute more than they take out.
That solves a lot of problems on one stroke.
I don’t know how to do this but we need to enact a miracle to save Britain. Might as well be this one.
June 13, 2025
Oh yes, let’s return to 1432 and the Forty Shillings vote, it is so obviously the solution ….
June 13, 2025
Yes that’s the answer. If you don’t pay the piper, you can’t call the tune!
June 12, 2025
Even communists have dreams.