'It looks pretty dire': Lewis Goodall reacts to the Budget

Natasha Clark still with me, LBC's political editor, Lewis Goodall joins us both, presenter of Sundays, the Lewis Goodall on LBC and co-host of Global's podcast, The News Agents. So those are the pleasantries over, Lewis. What did you make of all that? I feel, Sheila, when I heard John Healey's budget, which was one of the more unspectacular budgets, I think it's fair to say, that I've seen, it reminds me of what I think afflicts this government overall, this new Labour government, which is it seems to me like a government increasingly in a straight jacket. In fact, two sets of straightjackets, if that's possible. What do I mean by that? I think that this is a government which does actually have potentially a radical political agenda, which Andy Burnham signposted at that party conference speech in Liverpool, which he said he wanted it to be the end of neoliberalism. The problem is, is that politically, when we think about all of the things he said, that he thinks that that means, you know, massive, much more substantial devolution, changes to the voting system, going back into the European Union. He doesn't have a mandate for those things. He's stuck with what Keir Starmer had. And economically, as John Healey just demonstrated, he's in another straightjacket, which is he can't spend. He can't do radical economic things because he is hemmed in by increasingly crippling debt interest payments, by a deficit which is still too large and a world which is being buffeted by extremely high interest rates for governments in terms of sovereign bonds. Can I just interject on that on that debt interest payment? He alluded in the early on in the speech to an extra 14 billion pounds of debt interest being paid because of the war. And that is why I think watching that speech, I have been somewhat sceptical about this. But I do think that there is an extra logic to an election coming sooner rather than later. As long as the polls hold, I think that what this government is going to try and need to do is break out of at least one or other of those straitjackets. The economic stuff is really largely beyond its control, particularly if the Iran war resumes and geopolitics intrudes. Basically, these figures could be out of date within a matter of days. Lots of rumors about Trump starting another set of incursions on Iran. But politically, that is what is in the government's control and in the government's gift. And if Andy Burnham were to create a new manifesto on which Labour stood, which was far more radical than the old, it would give this government a sense of purpose and a sense of mission that, frankly, it can't, in a sense, at the moment, have. Natasha on that question of a mandate you know Lewis saying he doesn't have a mandate for this that or the other a lot of when whenever we talk about the mandate a lot of people text in or call it particularly texting in saying what government sticks to a mandate it doesn't matter but it matters to a lot of voters doesn't it that mandate promises are kept to, I think sorry, manifesto promises, yes, I think it matters to Andy Burnham as well, he's talked a lot about trust in politics and wanting to restore some of that, so I don't think when I was talking about it with James earlier in response to the Brexit debate, I think it's very clear that he doesn't want to overstep that manifesto and he thinks that that is integral to trust in politics going forward. But yes, if he wants to stretch the boundaries of that manifesto, and eventually he's going to have to because he's not going to be able to separate himself enough from Keir Starmer in order to do so, he is going to run up against a whole lot of problems. And we're just now getting the red book, the blue book, actually, I say, from the Treasury, which has just dropped in the last sort of few minutes With all of the details about that economic situation that Lewis has just been talking about, it looks really dire for John Healey in the next couple of years. We should just first mention the Office for Budget Responsibility looking at the growth forecasts. For you and I, Sheila, it means lots of percentages. And, you know, I think it's hard for people to understand what exactly is GDP. But it is the amount of the economy is going to grow over the next few years. The Office for Budget Responsibility have basically downgraded it. and particularly for 2027 next year, it was 1.6% growth. It's now going to be 1%. That's a big fall. Massive drop. And every other year is also slightly different from the forecast, the spring forecast. And do they think that's because of the war in the Middle East? Partly, yes. The government are also going to find a real battle on their hands in terms of government borrowing, despite what you just heard John Healey talking about fiscal discipline. According to these small print of these documents, the government are going to be spending billions and billions and billions of pounds extra in borrowing in every single year of this Parliament and with debt costs at such a high, high cost. That's going to be a real problem for the later, latter end of the Parliament. Maybe John Healey's, however, not going to be Chancellor during that point. But this is sort of what I'm getting at. When Kemi Badenoch gets up, as, of course, the Leader of the Opposition will and criticise things, the truth is, and this is an uncomfortable truth for British politics, the room for manoeuvre and the scale of options available to any government right now is more limited. we have got to get used to as long as interest rates, two things have happened over the past 10 years which are way more important than anything that Healey talked about today, one the era of cheap interest rates which basically existed from the financial crisis onwards where basically the government was almost being paid to borrow any government that's over that came to an end after the covid period and during that time since 2008 british governments have gone through a series of crises some self-inflicted like brexit some not self-inflicted like the financial crisis itself or like the war in Ukraine energy price shocks ukraine covid itself which has moved us from the sort of country that had 40% debt to GDP ratio to a country with 100% and a country with 100% debt to GDP ratio i.e. we owe the sum total of every pound is generated in our economy in each and every year it means that you as a government any government have fewer options available to you we're poorer than we used to be and just on that sheila i mean you know one of the big headlines from this this budget what what has Healy decided to do he's decided to dig in to the so-called fiscal headroom i.e. rachel reeves left him with 20 billion plus or so a fiscal headroom which was more than he had in the back pocket down the back of the sofa to deal with crises he has dug into that to soften some of the choices he's had to make but once you've done that obviously you've got less down the back of the sofa and and just on touch's point on on OBR in the in their budget document say this the evolution of the conflict in the middle east and its implications for energy prices interest rates and inflation are significant they say that if there is going to be energy prices were to peak at a higher level if the war is to resume and remain elevated for longer we'd expect increased inflation weaker GDP growth and a tightening of financial conditions and that could raise borrowing by as much as 17 billion by the end of 2028 and by 6 billion by 2032 and these sounds like huge numbers but what it means is is that the government will have far less to spend on public services it will have less capability to cut taxes on businesses we already know it's going to go for more for defense so that will take from somewhere and bear in mind when i talk about an early election i mean the other thing i think that adds ballast to that is that on the basis of these figures John Healey is saying that he will have departmental cuts of two or three percent or so going into 2028 29 into an election year now that would be difficult for any government but for a Labour government to be doing that well if you believe that they're going to do that i mean frankly you don't know much about and that's just a standstill that is indeed these are these cuts that have been baked in i think the Conservatives baked them in basically at the end of their time in government and unless John Healey changes course with i think something like an extra 10 to 11 billion pounds per year he's going to have to cut public services in order to make the books add up and that's going to be a real challenge for him and just a quick one to both of you before the news same question let's say you're right let's say there is a general election sooner rather than later what will that allow in your view give me one or two things maximum that you think that could allow Andy Burnham to do that he can't choose now well the one main thing two main things actually that he could do is something on Brexit which he's obviously been hinting on that he wants to go further on Brexit He keeps saying he's not going to break the Labour manifesto on rejoining the single market and the customs union. Those are the red lines. They completely go out the window if there's an election tomorrow. And the second thing is taxes. He has that tax triple lock. That is one thing that the government will be desperate about. No income, no. Exactly. They will be desperate to scrap that. But again, it's going to be really hard to go into an election saying I'm going to raise taxes because who's going to vote for that? I think the Brexit thing is the most significant thing, Sheila. Very rarely on Budget Day, I think Prime Minister's questions was more important than the budget. because I think Andy Burnham had an opportunity to walk back some of the comments he's been making about Brexit, and what really struck me about the Prime Minister was his unwillingness to do so. In fact, not just his unwillingness, but his political confidence that he could attack the Conservatives' Brexit deal, attach that to Kemi Badenoch personally, and link it to higher uncontrolled immigration. It feels to me as if the Prime Minister is preparing a set of political attacks for potentially an election or certainly a political campaign which is anchored around Europe to come and the advantage of that of course Sheila is that doesn't cost any money he doesn't have to make any tax implications about it he could potentially at a time where public spending is difficult where he hasn't the ability to increase public spending further you can see the appeal potentially of anchoring your politics around a pro-European agenda which would unite the progressive vote behind it's not without risk of course but i was struck by the prime minister's confidence in that political attack you think he'll get frustrated enough to go early i think that if he wants to have he knows clearly he has a political agenda which right now i mean you're asking that question about the mandate i mean yeah listeners and viewers are right technically of course governments can do what they want but let's imagine Andy Burnham says now right i'm going to say to my Labour MPs we're going to uh go for freedom of movement we're going to go back into the single market Labour MPs will say well I didn't stand on that manifesto particularly those in sort of more red wall-y brexit-y places the mandate matters not so much just because it is permission from the public but because it gives him authorities over his MPs to say, this is what we stood on, this is what we're going to do.