WEBVTT - UK Chancellor Rachel Reeves Talks UK Bonds Selloff

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. We did have that

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<v Speaker 1>first labor budget in over fourteen years yesterday. The market

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<v Speaker 1>reaction has been something to behold. Chancellor Rachel Reeves, thank

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<v Speaker 1>you so much for joining me. I feel like I'm

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<v Speaker 1>kind of here for a reason because we've seen such

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<v Speaker 1>a ferocious guilt sell off. It's spreading now to stocks

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<v Speaker 1>and sterling. Are you worried that we're heading for a

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<v Speaker 1>listrous situation?

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<v Speaker 2>The number one commitment of this government is economic and

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<v Speaker 2>fiscal stability, which is why we put in place yesterday

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<v Speaker 2>in the budget robust fiscal rules that we will meet

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<v Speaker 2>two years early. There's a significant fiscal consolidation during the

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<v Speaker 2>course of this parliament that takes debt as a share

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<v Speaker 2>of our economy from four and a half percent, which

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<v Speaker 2>is what we inherited to two point one percent of GDP.

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<v Speaker 2>And we've set out a framework for the second phase

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<v Speaker 2>of the spending review based on the envelope that we

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<v Speaker 2>set out yesterday. That will require difficult decisions, but they

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<v Speaker 2>are ones that this government are prepared to mate because

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<v Speaker 2>we know the importance of economic and fiscal stability.

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<v Speaker 1>Which also your margin. Ferrera, for meeting your main fiscal

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<v Speaker 1>rules near historic lows. If there's even a minor hit

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<v Speaker 1>to growth, you'd have to hike taxes more to hit

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<v Speaker 1>your fiscal rule. That's not very stable for the bond vigilantes,

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<v Speaker 1>is it.

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<v Speaker 2>We have more headroom than the previous government left us,

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<v Speaker 2>and that is important to guard against those sorts of shocks.

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<v Speaker 2>But we in the budget yesterday were open and honest

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<v Speaker 2>about the scale of the challenge left to us by

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<v Speaker 2>the previous government. But we have now put our public

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<v Speaker 2>finances on a stable and a solid trajectory, including through

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<v Speaker 2>difficult decisions on increasing taxes. We did increase taxes yesterday

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<v Speaker 2>by forty billion pounds. That was necessary alongside with the

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<v Speaker 2>changes they made on spending and welfare to put our

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<v Speaker 2>public finances on a firm trajectory. And that's what we

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<v Speaker 2>did in the budget yesterday.

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<v Speaker 1>But how can investors believe that this is a one

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<v Speaker 1>off hit when you repeatedly said before the election you

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<v Speaker 1>weren't going to raise taxes beyond your manifesto commitments. Now

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<v Speaker 1>you've raised them twenty billion pounds more than the fiscal

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<v Speaker 1>hole the Tories left behind.

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<v Speaker 2>Well, we were left with a terrible situation by the

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<v Speaker 2>previous government, a big black hole in the public finances,

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<v Speaker 2>a number of commitments around infected blood and the post

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<v Speaker 2>office scandal that weren't properly funded. We've now put all

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<v Speaker 2>of that out in the open, and we've raised taxes

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<v Speaker 2>in a way that now put our public finances on

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<v Speaker 2>a stable trajectory. Indeed, the Office of Budget Responsibility confirmed

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<v Speaker 2>that we meet both our stability and our investment rule

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<v Speaker 2>two years early. That should give confidence alongside what the

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<v Speaker 2>International Monetary Funds said yesterday that these were the right

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<v Speaker 2>decisions for our public finances and indeed for growth. We're

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<v Speaker 2>making the decisions to get our public finances on a

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<v Speaker 2>firm trajectory and also to boost the growth potential of

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<v Speaker 2>our economy.

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<v Speaker 1>But the IMF endorsement, it's almost out of date now

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<v Speaker 1>given the market reaction, and a lot of people are

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<v Speaker 1>going to be asking what the point of all these

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<v Speaker 1>tax rises was when the OBR c's the economy growing

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<v Speaker 1>more slowly under this parliament under your plans than if

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<v Speaker 1>Richie soon I could stayed Prime Minister.

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<v Speaker 2>But the OBR say that their forecast in March would

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<v Speaker 2>have been materially different if they knew then what they

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<v Speaker 2>know now about the previous government spending plans, so those

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<v Speaker 2>comparisons aren't fair ones to make that. The OBR say

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<v Speaker 2>that growth will be around the same in this parliament

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<v Speaker 2>as what they said previously, but of course those projections

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<v Speaker 2>were based on spending projections which weren't real that. The

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<v Speaker 2>growth forecasts, though, aren't the summit of my ambition, which

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<v Speaker 2>is why we are doing planning reform, pensions reform, skills

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<v Speaker 2>reform to get our country growing again, and we're determined

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<v Speaker 2>to do that. But the OBR also say that over

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<v Speaker 2>the longer term, our plans will boost GDP by one

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<v Speaker 2>point four percent. That is significant, or one point four

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<v Speaker 2>percent when our economy has barely grown the last of

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<v Speaker 2>five years. It is a significant boost to growth. But

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<v Speaker 2>it shows that this government, that this government, and this

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<v Speaker 2>is one point four percent in addition to the growth

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<v Speaker 2>we're already experiencing, just to be clear about that, and

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<v Speaker 2>that would be a big uplift on the growth of

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<v Speaker 2>we experienced the last few years. But we're doing more

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<v Speaker 2>to boost growth. We're getting Britain building again with those

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<v Speaker 2>planning reforms. We're unlocking long term patient capital to help

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<v Speaker 2>small businesses and start up and scale up businesses to grow.

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<v Speaker 2>All of that could have a big impact on growth,

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<v Speaker 2>as could the sixty three and a half billion pounds

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<v Speaker 2>investment that this government unlocked at our International Investment Summit

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<v Speaker 2>just two weeks ago.

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<v Speaker 1>And yet, Chancellor, for all your revenue raising, there are

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<v Speaker 1>still going to be real terms cuts for some government departments.

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<v Speaker 1>If that's not the definition of austerity.

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<v Speaker 2>What is That's not correct? The numbers we put out

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<v Speaker 2>yesterday that shows real terms increases to government spending of

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<v Speaker 2>one point five percent during the course of this parliament

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<v Speaker 2>one point seven percent. If you take into account capital

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<v Speaker 2>spending as well, austerity that would be even higher than

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<v Speaker 2>the growth roats being forecast. Austerity is when you're cutting

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<v Speaker 2>public spending. We're not cutting public spending, but it will

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<v Speaker 2>require difficult decisions, and we set out the envelope for

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<v Speaker 2>spending in the Parliament ahead at the budget yesterday. We

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<v Speaker 2>are determined to live within art means. We are conducting

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<v Speaker 2>a zero based review to drive efficiency and productivity across

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<v Speaker 2>government because better public services are not just about money.

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<v Speaker 2>It's about running those public services better and that is

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<v Speaker 2>what we're going to do well.

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<v Speaker 1>Indeed, think tanks like the Resolution Foundation are saying inevitably

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<v Speaker 1>employers are going to pass on this national insurance rise

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<v Speaker 1>to workers, that this is going to be the worst

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<v Speaker 1>term for living standards under any labor government. Yes, you're

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<v Speaker 1>not technically raising taxes on working people, but if you're honest,

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<v Speaker 1>it's going to feel like it won't it.

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<v Speaker 2>Well, the last parliament saw living standards stagnate. It was

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<v Speaker 2>the worst parliament for living standards ever recorded. The Officer

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<v Speaker 2>Budget Responsibility forecast yesterday that real household disposable income will

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<v Speaker 2>increase on average by zero point five percent in real

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<v Speaker 2>terms per year. So that is a world away from

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<v Speaker 2>the stagnating living standards that we saw in the last parliament.

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<v Speaker 2>But do we want to do more? Absolutely. That's why

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<v Speaker 2>we were introducing planning reform, the pensions reform, the skills reform,

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<v Speaker 2>to get Britain building, to get our economy growing again,

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<v Speaker 2>bringing in private sector investment, for example through the National

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<v Speaker 2>Wealth Fund and through the International Investment Summit that unlocked

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<v Speaker 2>sixty three and a half billion pounds of private investment

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<v Speaker 2>in the UK, showing the confidence that business and investors

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<v Speaker 2>have in this government and our strategy.

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<v Speaker 1>Chancelly, you keep emphasizing the long term here. Do you

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<v Speaker 1>worry that you're not going to get two terms in

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<v Speaker 1>government to realize your ambitions, to get to the summit

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<v Speaker 1>of your ambitions, because it's going to take a decade

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<v Speaker 1>of national renewal for people to feel better off. I'm

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<v Speaker 1>thinking about George Broufsenior saying, read my lips, no new

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<v Speaker 1>taxes and he was out after one term.

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<v Speaker 2>Well, we made it was a significant budget yesterday, but

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<v Speaker 2>that budget wipes the slate clean so that we never

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<v Speaker 2>have to do a budget like this again. We are

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<v Speaker 2>cleaning up the mess left by the previous government, but

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<v Speaker 2>we are meeting our fiscal rules two years early. We've

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<v Speaker 2>set the spending path for public services for the course

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<v Speaker 2>of this parliament. We will do a zero based review

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<v Speaker 2>to make sure we're getting value for money for that spending.

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<v Speaker 2>We have had to make tax increases, but that is

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<v Speaker 2>to get our public finances on a sustainable footing. Economic

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<v Speaker 2>and fiscal stability are the number one priorities of this

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<v Speaker 2>government and we will meet them.

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<v Speaker 1>So can I take that confirmation no tax rises for

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<v Speaker 1>the rest of this parliament.

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<v Speaker 2>Or no chancellor is going to be able to tie

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<v Speaker 2>their hands in that way. But there was a significant

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<v Speaker 2>budget yesterday because we had to wipe the slate clean

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<v Speaker 2>after their economic mismanagement, the chaos and the instability from

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<v Speaker 2>the previous government. No government should have found themselves in

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<v Speaker 2>a position that we did, having to clear up that mess.

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<v Speaker 2>We've now done that and we can move on.

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<v Speaker 1>Chanceller Rachel Reeves, thank you so much.

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<v Speaker 2>Thank you,