00:00:00
growth down borrowing up and now an
00:00:03
emergency budget my name is Tom Howard
00:00:06
and this is gbn money growth growth
00:00:10
growth were to be the watchwords of this
00:00:13
government and yet now it's going going
00:00:18
gone yes what we're seeing is the growth
00:00:20
rate for this year being cut in half by
00:00:23
the official Watchdog of the treasury
00:00:27
the obbr the office for Budget
00:00:29
responsibility that body that has been
00:00:30
hailed and respected so much by the
00:00:33
chancellor Rachel Reeves well it's
00:00:35
clearly not giving her the same respect
00:00:38
back as clearly today we are seeing half
00:00:41
the rate of growth than was previously
00:00:43
thought down from 2% to 1% It might not
00:00:47
seem like a lot but if you think about
00:00:48
the LW of small numbers what this really
00:00:51
means is we're seeing half as much extra
00:00:53
goods and services in the economy than
00:00:56
was thought this compounds over time and
00:00:59
really really affects the decisions that
00:01:01
the chancellor can make it affects how
00:01:04
much money can be spent and indeed how
00:01:06
much more money needs to be raised
00:01:09
through tax this is one of the reasons
00:01:11
why we're seeing what the Tories are
00:01:13
describing as an emergency budget as
00:01:16
soon as next week of course when the
00:01:19
chancellor Rachel Reeves became
00:01:21
Chancellor she was saying she wanted to
00:01:24
return the chancy to stability to say
00:01:26
that there should only be one major
00:01:28
fiscal event from the treasury each year
00:01:32
already it seems that that has been
00:01:34
broken that promise of stability of
00:01:37
returning to just one major fiscal event
00:01:40
from that dispatch box well clearly it's
00:01:43
not been a full year since the last one
00:01:45
and already looking forward to Wednesday
00:01:48
this fiscal event this OB update or if
00:01:52
you're being pejorative this emergency
00:01:55
budget what could it contain well
00:01:58
clearly there are worries there are
00:02:00
fears this might be further Revenue
00:02:02
raising measures what does that mean
00:02:05
more tax Rises more than the 40 billion
00:02:09
tax Rises that we saw in Rachel Reeves
00:02:12
last budget at the time of that budget
00:02:15
they were saying that this would be
00:02:17
getting the country back on a firm
00:02:19
footing the only major tax raising
00:02:21
budget in this Parliament after that the
00:02:25
mission would be growth growth growth
00:02:27
and yet that hasn't been the case we've
00:02:30
seen growth forecasts fall not rise
00:02:33
we've seen the cost of borrowing go up
00:02:36
not down and we've seen the amount of
00:02:38
borrowing almost twice as much in
00:02:41
February this year than was expected it
00:02:44
was expected to be around 6 billion in
00:02:47
February that was the forecast and yet
00:02:49
now we learn it's closer to 11
00:02:53
billion this is not funny money this is
00:02:57
serious stuff but why is is it that
00:03:00
growth is so much lower why is it that
00:03:03
receipts are so much lower why is it
00:03:05
that the country has clearly taken uh
00:03:08
not the course that was first thought of
00:03:10
by the chancellor herself one of the
00:03:13
concerns is that the amount of tax that
00:03:16
was raised in that first budget has had
00:03:19
a bigger negative impact on the economy
00:03:21
than was first thought the cost of
00:03:24
hiring individuals particularly low uh
00:03:28
salaried individuals has risen
00:03:30
precipitously through the national
00:03:32
insurance tax rise this more than 20
00:03:35
billion pound of extra taxes placed on
00:03:38
businesses if they wish to hire people
00:03:41
clearly that has a drag effect not only
00:03:44
on the number of people that can be
00:03:45
hired but frankly on the amount that
00:03:48
those people can be paid and if people
00:03:50
in low wages can't get those pay Rises
00:03:53
because the money that was reserved for
00:03:56
pay Rises is now going into the
00:03:57
treasury's coffers instead well that's
00:04:00
less money that low paid people can go
00:04:02
out and spend in the economy themselves
00:04:06
that's a a knock to what's known as the
00:04:08
multiplier effect when people go out and
00:04:11
spend money and that money itself can
00:04:13
then be spent again and again and again
00:04:15
it can be multiplied and counted more
00:04:17
than once it can contribute to that
00:04:20
economic growth that this country is so
00:04:23
seeking but clearly that tax rise has
00:04:26
had a negative impact on what growth
00:04:29
might be and the office for Budget
00:04:31
responsibility did say at the time that
00:04:33
that tax rise would hit growth as blocks
00:04:37
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Journey like I did
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today but there's been more too of
00:05:39
course the interest rate decision that
00:05:41
we saw this week has held rates at a
00:05:44
relatively High rate
00:05:46
4.5% that's not as quick as the initial
00:05:49
estimates of uh falling interest rates
00:05:51
would have been why well one of the
00:05:54
reasons is that in is that inflation has
00:05:57
been higher than expected it's been
00:05:59
ticking up under this government rather
00:06:02
than ticking down why is that well there
00:06:05
were tens of billions of pounds extra
00:06:08
borrowing in that initial budget under
00:06:10
this government yes Rachel Reeves
00:06:12
changed the debt rule it counted the
00:06:15
assets that the British government holds
00:06:18
in a a different way changing that
00:06:20
balance sheet calculation and allowing
00:06:22
for up to 50 billion pounds in extra
00:06:25
borrowing but we all know what happens
00:06:27
when the government borrows more than it
00:06:29
takes in in tax that means that there's
00:06:32
more money slushing around the system
00:06:35
where does that money come from it's
00:06:37
printed and how is that money spent well
00:06:40
when there's more money chasing the same
00:06:43
number of goods and services we can all
00:06:46
see The Logical implication of that it
00:06:49
doesn't expand the number of goods and
00:06:51
services to meet the money no the money
00:06:53
just meets those goods and services
00:06:55
meaning that those goods and services
00:06:57
cost more money too much money chasing
00:07:02
too few goods that leads to inflation so
00:07:06
what have we seen not only higher taxes
00:07:08
by tens of billions of pounds but also
00:07:11
higher borrowing by tens of billions of
00:07:14
pounds and now lower growth half as much
00:07:17
growth in the coming year than was first
00:07:19
expected by the office for Budget
00:07:21
responsibility this has material impacts
00:07:25
not just for the future plans of this
00:07:27
government not just for the tax rates
00:07:29
that you're and I may have to pay but
00:07:31
also for the amount of money that the
00:07:33
government can spend on things like
00:07:35
benefits on things like pensions we've
00:07:37
already seen the winter fuel allowance
00:07:39
famously cut we've seen disability
00:07:41
benefits uh have the acts taken to them
00:07:43
too with uh 5 billion pounds of cuts
00:07:46
coming there but there are now
00:07:48
speculations that the uh fiscal drag
00:07:51
that secret sneaky tax rise that all of
00:07:54
us have had to face rarely since the uh
00:07:57
pandemic that could be extended further
00:08:00
what do I mean by that the uh thresholds
00:08:03
at which we pay income tax despite our
00:08:06
salaries generally Rising despite
00:08:09
inflation definitely Rising those Sal
00:08:12
those uh income tax thresholds remaining
00:08:15
at the same rate meaning that more and
00:08:18
more people are surreptitiously dragged
00:08:20
into higher tax brackets we have never
00:08:23
in the history of this country had so
00:08:25
many people paying the absolute top rate
00:08:28
of tax uh as we do today and similarly
00:08:31
the next step down we have never had
00:08:33
more people paying the 40p in the pound
00:08:36
rate and it goes on and on this is
00:08:40
clearly what the government has been
00:08:42
intending to do behind the scenes over
00:08:44
the last few years the question now is
00:08:47
how many more years will this fiscal
00:08:49
drag drag on how much longer will people
00:08:53
be paying a higher rate of tax than they
00:08:56
would have been if they had a real terms
00:08:58
pay increase inrease and real terms uh
00:09:01
tax threshold increase uh to boot well
00:09:04
clearly some big decisions there from
00:09:06
the chancellor and further to that what
00:09:09
sort of investment may now be cut we've
00:09:12
seen how tax Rises may continue these
00:09:15
stealth tax Rises this fiscal drag May
00:09:17
drag on for years more than expected
00:09:20
we've seen where cuts are falling with
00:09:22
regard to pensions uh and with regard to
00:09:25
those who receive disability benefits
00:09:27
but there are now questions in terms of
00:09:29
what the government may be spending on
00:09:31
on this critical National infrastructure
00:09:35
where might new road or rail projects be
00:09:38
cut back where might we see less being
00:09:41
spent on the uh environment around us
00:09:44
and we all know that that contributes to
00:09:46
a lack of growth too Rachel Reeves
00:09:49
herself has said so time and time again
00:09:52
that we need to have greater Road and
00:09:54
rail infrastructure that we need to get
00:09:56
building that we need more homes all of
00:09:59
these things of course contribute to
00:10:01
growth but if we're cutting back on the
00:10:03
amount that we're investing in this uh
00:10:06
physical infrastructure well then we're
00:10:08
cutting back on growth to and you can
00:10:10
see how this becomes a negative spiral
00:10:13
higher taxes higher borrowing less
00:10:16
investment all of these things ticking
00:10:19
together to push down the economic
00:10:21
potential of this country and that's
00:10:24
before we come on to energy because we
00:10:26
have seen Energy prices rising and
00:10:29
Rising this is a concerning time for
00:10:33
anyone trying to keep the lights on for
00:10:35
anyone trying to pay those energy bills
00:10:37
the government when it came in promised
00:10:39
that energy bills would fall by
00:10:41
£300 per household thanks to State
00:10:44
investment in Great British energy the
00:10:47
Renewable Energy company that doesn't
00:10:49
actually generate any energy and yet
00:10:52
what have we seen in the first eight
00:10:53
months of this government nothing but
00:10:55
upward pressure on prices energy costing
00:10:58
more not costing less now the government
00:11:02
says that it's big plan to build more
00:11:04
solar Farms more wind farms and yes in
00:11:07
time more nuclear to will bring down the
00:11:10
costs but what they don't say is that
00:11:12
whilst it's true that a wind farm is
00:11:14
technically the cheapest form of energy
00:11:17
to produce it doesn't produce that
00:11:19
energy all the time what does that mean
00:11:22
that for every wind farm that we build
00:11:24
we have to build a backup source of
00:11:27
generation 2 and what is that backup
00:11:29
source of generation that can easily be
00:11:31
switched on and off it's gas yes for
00:11:35
every wind farm that has to be
00:11:36
constructed we need in effect some gas
00:11:39
power too so what does that mean that we
00:11:42
shouldn't only count the amounts that
00:11:45
we're spending on the wind farms or the
00:11:47
solar Farms because that's not the full
00:11:49
picture to add to that we also need to
00:11:52
include the infrastructure the uh the
00:11:56
transmission towers the substations and
00:11:58
yes the the backup power to when you
00:12:01
include the spending that is necessary
00:12:03
on all of these other elements what
00:12:05
happens well wind and solar doesn't look
00:12:08
so cheap after all to get wind and solar
00:12:11
integrated into the grid fully on with
00:12:14
its backup with its transmission with
00:12:17
those pylons across the countryside well
00:12:19
suddenly it looks more and more and more
00:12:22
expensive and this is the real problem
00:12:25
here that the government is almost
00:12:27
telling itself a lie when it comes to
00:12:30
infrastructure when it comes to energy
00:12:33
this isn't going to make things cheaper
00:12:35
unless there is some miraculous
00:12:37
technological breakthrough in terms of
00:12:39
battery storage or indeed in terms of
00:12:42
getting the price of nuclear power lower
00:12:44
ultimately there is a reason why the
00:12:47
price of energy in this country is set
00:12:49
on gas and that's for every renewable
00:12:51
energy source that is built you need gas
00:12:54
backup and so what's the government's
00:12:56
policy when it comes to gas don't
00:12:59
extract it yes we sit on a wealth of
00:13:02
natural gas particularly on Shore only
00:13:05
in the last few months and yet another
00:13:07
uh enormous uh repository of shale gas
00:13:11
has been found in Lincolnshire it's
00:13:13
worth potentially tens of billions of
00:13:15
pounds and yet government policy is
00:13:17
don't touch it leave it in the ground
00:13:20
the government has another policy too
00:13:22
for North Sea oil and gas no new
00:13:26
exploration no further exploration
00:13:29
beyond the licenses granted under the
00:13:31
previous
00:13:32
government this is almost boggling of
00:13:36
the mind when you look at not only
00:13:37
countries like uh Russia or the Middle
00:13:40
East not only the dictatorships of the
00:13:42
world that of course are prodigiously
00:13:43
extracting more oil and gas uh as fast
00:13:46
as they can but also democracies look at
00:13:50
countries uh like Norway look at
00:13:52
countries like Canada like the United
00:13:55
States of America they're not stopping
00:13:57
gas exploration they know that more gas
00:14:00
is critical not just to keeping the
00:14:03
lights on and the bills down but also to
00:14:05
adjust
00:14:07
transition it's not impossible to have
00:14:10
uh gas and Net Zero in fact the only way
00:14:13
that you're going to in any way that is
00:14:16
socially acceptable last the next couple
00:14:18
of decades until we get to 2050 uh is
00:14:21
with more gas and yet almost uniquely
00:14:25
the British government is saying no
00:14:27
further explanation uh no further
00:14:30
onshore drilling a moratorium on uh
00:14:33
Shale gas extraction uh on land in fact
00:14:37
concreting up Wells
00:14:40
too it's hard to see how the UK can have
00:14:43
a growing economy with such expensive
00:14:45
energy by some measures the most
00:14:47
expensive energy of any country of any
00:14:50
developed country on the planet this is
00:14:54
a serious position to be in we have high
00:14:57
energy costs High tax
00:14:59
High borrowing and low growth these
00:15:02
things are not separate they all fit
00:15:05
together it's all part of the same
00:15:07
puzzle to some extent the United Kingdom
00:15:10
has uh the worst of Both Worlds when it
00:15:13
comes to the advice that we give to
00:15:16
developing countries what do I mean by
00:15:18
that when we go to subsaharan Africa we
00:15:20
will tell these countries what you need
00:15:23
is reliable energy and infrastructure
00:15:26
what do we do in this country we have
00:15:28
unre reliable energy and expensive
00:15:31
infrastructure the government has been
00:15:33
trying to build a tunnel called the
00:15:35
lower temps Crossing for the best part
00:15:37
of the last decade there hasn't been a
00:15:40
single Spade in the ground to dig that
00:15:42
tunnel yet and yet it has already cost
00:15:45
hundreds of millions of pounds in
00:15:47
paperwork we've spent more on the
00:15:49
planning application for the lower temps
00:15:51
Crossing than Norway spent actually
00:15:54
completing the longest underground
00:15:57
tunnel in the world
00:15:59
yes that's the position that we found
00:16:01
ourselves in not only do we have
00:16:03
expensive energy but when we try and
00:16:05
build a road or a railway or a tunnel we
00:16:08
Face an enormous amount of environmental
00:16:12
uh red tape of judicial review of uh the
00:16:16
length of uh impact statements that
00:16:19
would not easily be readable by one
00:16:22
person in One lifetime rewrite more than
00:16:25
the entire works of Shakespeare just to
00:16:27
get a single infrastructure project
00:16:30
approved how is this sustainable for
00:16:33
this country it's clear that when there
00:16:36
is this emergency budget or indeed
00:16:38
economic updates whichever uh version of
00:16:41
that you wish to call it uh next week
00:16:43
there will need to be a comprehensive
00:16:46
strategy for growth because this country
00:16:49
is clearly falling behind what has been
00:16:51
tried so far has not been working the
00:16:54
proof is in the numbers the proof of the
00:16:57
pudding is in the eating and it doesn't
00:16:59
taste terribly good no we're not seeing
00:17:02
the growth that we wanted to see we're
00:17:05
not seeing the amount of tax revenue
00:17:08
that the government had expected indeed
00:17:10
when we look at the number of
00:17:11
millionaires in this country it's going
00:17:13
down not up people are leaving this
00:17:16
country to escape the high taxes and
00:17:19
when you look at the non-domiciled high
00:17:21
net worth individuals those billionaires
00:17:24
who based themselves in the UK well
00:17:26
since that status was abolished by the
00:17:28
treasury
00:17:29
what's happened well those non-dom acide
00:17:31
people have chosen to take their lives
00:17:35
elsewhere uh and that means that no tax
00:17:38
that they pay is now paid in the United
00:17:39
Kingdom Under the non-dom regime of
00:17:41
course earnings they made in the UK were
00:17:43
paid in the UK well if they don't live
00:17:45
in the UK none of that is
00:17:47
retained it's clear that there have been
00:17:49
blunders blunders from this Chancellor
00:17:52
but could it be that next week is an
00:17:54
opportunity to wipe the Slate clean to
00:17:57
try and St start again to perhaps
00:18:00
deliver greater security cheaper energy
00:18:05
lower taxes well we can but hope because
00:18:09
currently it looks like the taxes will
00:18:11
be going up the energy expense will be
00:18:15
going up and perhaps even the borrowing
00:18:18
at that top level too we'll have to wait
00:18:20
and see we'll keep our eyes close on it
00:18:22
here at gbn money we'll be following the
00:18:25
emergency budget or indeed that fiscal
00:18:27
update whatever what you want to call it
00:18:29
and we'll be giving you the explanation
00:18:31
as soon as we have it every second
00:18:34
covered here on GB news analyzing the
00:18:37
details and what it means for you and
00:18:39
your household finances so remember to
00:18:41
stay subscribed to the gbn YouTube
00:18:43
channel for much more as we come closer
00:18:46
to that emergency budget
