Sam Hill, Head of Market Insights at Lloyds Bank.16 Mar 2025 08:32
The disappearance of Reeves fiscal headroom.
“(LON:LLOY) Lloyds Bank have looked at the numbers and thinks Chancellor Rachel Reeves will have to find more money and cut spending in March and then again in the Autumn.”
"Fiscal headroom will be rebuilt on 26 March, but it will be a case of running to stand still," says Sam Hill, Head of Market Insights at Lloyds Bank, ahead of the Chancellor's Spring Statement.”
“Economists at the UK bank hold a baseline assessment that the impact of the OBR’s macroeconomic forecast refresh will be that the government's £9.9BN of fiscal 'headroom' confirmed in the Autumn budget has disappeared and has evolved into a deficit of approximately £5BN.”
And we were told they won't come back for more.
It's called tax and spend, the renowned labour way.
"Given that the government has been insistent that its fiscal rules are non-negotiable, that means a policy response should be forthcoming," says Hill.”
Why would they keep to their promised fiscal rules? They've established that labour pledges are worthless, a pledge is a solemn promise, that's what we're dealing with here…liars.
“The UK's fiscal rule requires debt to be falling as a percentage of GDP by 2029-2030. The government is expected to muddle its way forward, meaning further big decisions await later down the road.”
In other words whatever Reeves announces, it ain't gonna cut it.
And the faithful believed that she had fixed the foundations, yet another fantasy.
“Lloyds Bank thinks the government will announce cuts to spending of about £15BN by 2029-30.”
“The government's budget outlook has deteriorated on a combination of lower-than-expected tax takes and higher-than-expected rises in bond yields, which drives up the cost of servicing existing debt.”
A direct result of labour policies.
"It would mean the government continues to be very sensitive to movements in bond yields. In the context of recent volatility not much imagination is required to think that the headroom could be eroded again by an Autumn Budget, requiring yet another reset," says Hill.
The downward spiral continues.
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