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