Analysis: What the Chancellor SHOULD Have Done

IEA Executive Director Tom Clougherty analyses Chancellor Rachel Reeves's Spring Budget statement of March 26, 2025. With economic forecasts worsening since October, the government's fiscal headroom has disappeared, leading to cuts in welfare and departmental spending alongside another effort to tackle tax avoidance. The budget appears to be an exercise in meeting minimum fiscal targets rather than addressing fundamental economic issues. Clougherty criticises how fiscal events have become focused on gaming OBR forecasts five years out rather than implementing principled long-term policymaking. Growth forecasts have been halved to just 1% for 2025, with lacklustre projections through the forecast window. He notes that 2024 and 2025 are essentially "lost years" in terms of per capita economic growth, with productivity improvements still being anticipated despite failing to materialise since the financial crisis. While the Chancellor's rhetoric around pro-growth policies is promising, Clougherty questions whether the substance matches the vision. He argues that a more radical approach to supply-side liberalisation is needed, pointing out that if minor planning reforms can boost GDP by 0.2% at no fiscal cost, more comprehensive reforms across planning, financial regulation, and energy could deliver significantly greater growth benefits that the UK economy desperately needs. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit economicaffairs.co.uk/subscribe