Former deputy of the Bank of England Charlie Bean has advised Chancellor Rachel Reeves not to act on a whim when it comes to spending in next week’s spring statement in order to meet the medium term fiscal objectives. Bean has also served in the Office for Budget Responsibility (OBR) board once and he once called the government’s approach dodgy and unreliable five year forecasts. It has been reported that Reeves is planning to make cuts, including to disability benefits, after the OBR revised downwards its forecasts. But Bean argued that using taxes and spending changes every time in response to these forecasts is detrimental to financial stability. He made the comment at a event by Resolution Foundation, and explained that, “We have got ourselves into a rather peculiar position where we are seeking to control OBR forecasts made five years from now by fine tuning spending.” The £10bn headroom Reeves who has signed up to the fiscal rules was planning to present one budget per year has been reduced by the variability in interest rates and therefore it is expected that there will be spending cuts on March 26. For the same event, Gemma Tetlow, the chief economist at the Institute for Government, also advised against policy changes at this time. She noted that while failing to act may worry bond investors, small, short-term measures may not reassure markets either. According to Tetlow, a more robust and sustainable approach would be more helpful in preserving financial stability. Another solution suggested by Bean – if necessary, extending the freeze on the income tax threshold up to 2029-2030, not rushing into spending cuts. The public will know the final decision on fiscal policy from the spring statement.
Former Deputy Warns Rachel Reeves Against Rushed Cuts
