Speaker 1: Bloomberg Audio Studios, podcasts, radio news. We did have that
Speaker 1: first labor budget in over fourteen years yesterday. The market
Speaker 1: reaction has been something to behold. Chancellor Rachel Reeves, thank
Speaker 1: you so much for joining me. I feel like I'm
Speaker 1: kind of here for a reason because we've seen such
Speaker 1: a ferocious guilt sell off. It's spreading now to stocks
Speaker 1: and sterling. Are you worried that we're heading for a
Speaker 1: listrous situation?
Speaker 2: The number one commitment of this government is economic and
Speaker 2: fiscal stability, which is why we put in place yesterday
Speaker 2: in the budget robust fiscal rules that we will meet
Speaker 2: two years early. There's a significant fiscal consolidation during the
Speaker 2: course of this parliament that takes debt as a share
Speaker 2: of our economy from four and a half percent, which
Speaker 2: is what we inherited to two point one percent of GDP.
Speaker 2: And we've set out a framework for the second phase
Speaker 2: of the spending review based on the envelope that we
Speaker 2: set out yesterday. That will require difficult decisions, but they
Speaker 2: are ones that this government are prepared to mate because
Speaker 2: we know the importance of economic and fiscal stability.
Speaker 1: Which also your margin. Ferrera, for meeting your main fiscal
Speaker 1: rules near historic lows. If there's even a minor hit
Speaker 1: to growth, you'd have to hike taxes more to hit
Speaker 1: your fiscal rule. That's not very stable for the bond vigilantes,
Speaker 1: is it.
Speaker 2: We have more headroom than the previous government left us,
Speaker 2: and that is important to guard against those sorts of shocks.
Speaker 2: But we in the budget yesterday were open and honest
Speaker 2: about the scale of the challenge left to us by
Speaker 2: the previous government. But we have now put our public
Speaker 2: finances on a stable and a solid trajectory, including through
Speaker 2: difficult decisions on increasing taxes. We did increase taxes yesterday
Speaker 2: by forty billion pounds. That was necessary alongside with the
Speaker 2: changes they made on spending and welfare to put our
Speaker 2: public finances on a firm trajectory. And that's what we
Speaker 2: did in the budget yesterday.
Speaker 1: But how can investors believe that this is a one
Speaker 1: off hit when you repeatedly said before the election you
Speaker 1: weren't going to raise taxes beyond your manifesto commitments. Now
Speaker 1: you've raised them twenty billion pounds more than the fiscal
Speaker 1: hole the Tories left behind.
Speaker 2: Well, we were left with a terrible situation by the
Speaker 2: previous government, a big black hole in the public finances,
Speaker 2: a number of commitments around infected blood and the post
Speaker 2: office scandal that weren't properly funded. We've now put all
Speaker 2: of that out in the open, and we've raised taxes
Speaker 2: in a way that now put our public finances on
Speaker 2: a stable trajectory. Indeed, the Office of Budget Responsibility confirmed
Speaker 2: that we meet both our stability and our investment rule
Speaker 2: two years early. That should give confidence alongside what the
Speaker 2: International Monetary Funds said yesterday that these were the right
Speaker 2: decisions for our public finances and indeed for growth. We're
Speaker 2: making the decisions to get our public finances on a
Speaker 2: firm trajectory and also to boost the growth potential of
Speaker 2: our economy.
Speaker 1: But the IMF endorsement, it's almost out of date now
Speaker 1: given the market reaction, and a lot of people are
Speaker 1: going to be asking what the point of all these
Speaker 1: tax rises was when the OBR c's the economy growing
Speaker 1: more slowly under this parliament under your plans than if
Speaker 1: Richie soon I could stayed Prime Minister.
Speaker 2: But the OBR say that their forecast in March would
Speaker 2: have been materially different if they knew then what they
Speaker 2: know now about the previous government spending plans, so those
Speaker 2: comparisons aren't fair ones to make that. The OBR say
Speaker 2: that growth will be around the same in this parliament
Speaker 2: as what they said previously, but of course those projections
Speaker 2: were based on spending projections which weren't real that. The
Speaker 2: growth forecasts, though, aren't the summit of my ambition, which
Speaker 2: is why we are doing planning reform, pensions reform, skills
Speaker 2: reform to get our country growing again, and we're determined
Speaker 2: to do that. But the OBR also say that over
Speaker 2: the longer term, our plans will boost GDP by one
Speaker 2: point four percent. That is significant, or one point four
Speaker 2: percent when our economy has barely grown the last of
Speaker 2: five years. It is a significant boost to growth. But
Speaker 2: it shows that this government, that this government, and this
Speaker 2: is one point four percent in addition to the growth
Speaker 2: we're already experiencing, just to be clear about that, and
Speaker 2: that would be a big uplift on the growth of
Speaker 2: we experienced the last few years. But we're doing more
Speaker 2: to boost growth. We're getting Britain building again with those
Speaker 2: planning reforms. We're unlocking long term patient capital to help
Speaker 2: small businesses and start up and scale up businesses to grow.
Speaker 2: All of that could have a big impact on growth,
Speaker 2: as could the sixty three and a half billion pounds
Speaker 2: investment that this government unlocked at our International Investment Summit
Speaker 2: just two weeks ago.
Speaker 1: And yet, Chancellor, for all your revenue raising, there are
Speaker 1: still going to be real terms cuts for some government departments.
Speaker 1: If that's not the definition of austerity.
Speaker 2: What is That's not correct? The numbers we put out
Speaker 2: yesterday that shows real terms increases to government spending of
Speaker 2: one point five percent during the course of this parliament
Speaker 2: one point seven percent. If you take into account capital
Speaker 2: spending as well, austerity that would be even higher than
Speaker 2: the growth roats being forecast. Austerity is when you're cutting
Speaker 2: public spending. We're not cutting public spending, but it will
Speaker 2: require difficult decisions, and we set out the envelope for
Speaker 2: spending in the Parliament ahead at the budget yesterday. We
Speaker 2: are determined to live within art means. We are conducting
Speaker 2: a zero based review to drive efficiency and productivity across
Speaker 2: government because better public services are not just about money.
Speaker 2: It's about running those public services better and that is
Speaker 2: what we're going to do well.
Speaker 1: Indeed, think tanks like the Resolution Foundation are saying inevitably
Speaker 1: employers are going to pass on this national insurance rise
Speaker 1: to workers, that this is going to be the worst
Speaker 1: term for living standards under any labor government. Yes, you're
Speaker 1: not technically raising taxes on working people, but if you're honest,
Speaker 1: it's going to feel like it won't it.
Speaker 2: Well, the last parliament saw living standards stagnate. It was
Speaker 2: the worst parliament for living standards ever recorded. The Officer
Speaker 2: Budget Responsibility forecast yesterday that real household disposable income will
Speaker 2: increase on average by zero point five percent in real
Speaker 2: terms per year. So that is a world away from
Speaker 2: the stagnating living standards that we saw in the last parliament.
Speaker 2: But do we want to do more? Absolutely. That's why
Speaker 2: we were introducing planning reform, the pensions reform, the skills reform,
Speaker 2: to get Britain building, to get our economy growing again,
Speaker 2: bringing in private sector investment, for example through the National
Speaker 2: Wealth Fund and through the International Investment Summit that unlocked
Speaker 2: sixty three and a half billion pounds of private investment
Speaker 2: in the UK, showing the confidence that business and investors
Speaker 2: have in this government and our strategy.
Speaker 1: Chancelly, you keep emphasizing the long term here. Do you
Speaker 1: worry that you're not going to get two terms in
Speaker 1: government to realize your ambitions, to get to the summit
Speaker 1: of your ambitions, because it's going to take a decade
Speaker 1: of national renewal for people to feel better off. I'm
Speaker 1: thinking about George Broufsenior saying, read my lips, no new
Speaker 1: taxes and he was out after one term.
Speaker 2: Well, we made it was a significant budget yesterday, but
Speaker 2: that budget wipes the slate clean so that we never
Speaker 2: have to do a budget like this again. We are
Speaker 2: cleaning up the mess left by the previous government, but
Speaker 2: we are meeting our fiscal rules two years early. We've
Speaker 2: set the spending path for public services for the course
Speaker 2: of this parliament. We will do a zero based review
Speaker 2: to make sure we're getting value for money for that spending.
Speaker 2: We have had to make tax increases, but that is
Speaker 2: to get our public finances on a sustainable footing. Economic
Speaker 2: and fiscal stability are the number one priorities of this
Speaker 2: government and we will meet them.
Speaker 1: So can I take that confirmation no tax rises for
Speaker 1: the rest of this parliament.
Speaker 2: Or no chancellor is going to be able to tie
Speaker 2: their hands in that way. But there was a significant
Speaker 2: budget yesterday because we had to wipe the slate clean
Speaker 2: after their economic mismanagement, the chaos and the instability from
Speaker 2: the previous government. No government should have found themselves in
Speaker 2: a position that we did, having to clear up that mess.
Speaker 2: We've now done that and we can move on.
Speaker 1: Chanceller Rachel Reeves, thank you so much.
Speaker 2: Thank you,