Rachel Reeves’s sums put UK terrifyingly close to disaster – you’ll pay if she’s wrong.uk
As a brilliant economist in her own right, chancellor Rachel Reeves clearly has a head for numbers. She’s going to need it.
Number’s up: Rachel Reeves had better get her sums right or everything will go wrong (Image: Getty)
Reeves is doing an important job, running the nation’s finances. This is even more important than the job she held at Halifax Bank of Scotland, straight out of Uni.
The Office for Budget Responsibility (OBR) calculates that UK government spending will amount to £1.276 trillion in the 2024/25 financial year.
That’s an awfully large sum. Transcribed in full it has a heap of zeros on the end: £1,276,200,000,000.
This works out as around £45,000 per household or 45.3% of national income.
That’s bigger than any other chancellor has had to handle. Until recently, government spending only took up around 36% of national income.
Alert readers may have noticed that their taxes have increased lately, a process that started under the Tories. That 45.3% figure explains why.
Reeves must be sure the money is spent wisely and her sums add up. This may cause some taxpayers to worry.
Happily, there’s no need. In May, Reeves assured us: “I worked at the Bank of England. I know what it takes to run a successful economy.”
Following her popular and well-received Budget, only a cynic would dispute that.
Her CV looks unbelievably good but I do have one concern.
Reeves is working to some very fine margins. If she gets her sums wrong, things could end badly and taxpayers will have to make up any shortfall.
So I was concerned to read a quote in the Daily Telegraph by Tom Pope at the Institute for Government. He says Reeves has left herself with a very small margin of error for balancing the books on day-to-day spending.
Pope puts it at just £10 billion. Transcribed in full this doesn’t have quite so many zeros on the end as my earlier number: £10,000,000,000.
I’m no mathematician, so I’ve had to do my sums very carefully.
I divided £10,000,000,000 by £1,276,200,000,000 and came up with this figure: 0.78%.
That’s the margin for error Reeves has and it’s wafer thin. Less than 1%!
Which does worry me. Because if she gets her sums just slightly wrong, it will leave an awfully big hole in the nation’s accounts.
On a £1.276trillion spend, £10 billion is a rounding error. Which worries me because Reeves is prone to make them.
On her CV, she claimed to have worked at the Bank of England for 10 years. On investigation, it turned out to be just six.
When this error emerged, unnamed sources defended Reeves by claiming she had simply “rounded up” her years of service.
Rounding up six years to 10 is an increase of 66%. That’s a lot bigger than 0.78%. Reeves can’t afford to make that kind of slip again.
Especially since she’s working to very unreliable data (which isn’t her fault). The Office for National Statistics (ONS) somehow missed 166,000 migrants who came to Britain in the 12 months to June 2023.
That doesn’t instil confidence either.
Even if Reeves gets her sums right we can’t be sure she’s working to the correct figures.
Which makes it even more terrifying that she’s left herself only the tiniest margins for error.
Under pressure at the CBI conference, Reeves pledged she wouldn’t be back for more taxes, a claim Labour business secretary Jonathan Reynolds strangely refused to back. Maybe he’s checked her sums, I don’t know.
Given the wafer thin margins Reeves is working to, it’s a risky claim. In my view, she’ll be back for more soon enough. In fact, I’d say it’s a mathematical certainty.
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