Position Posted: Chancellor of the Exchequer

It has been a bleak start for Rachel Reeves. Reports of lying about her credibility, pressure from the Labour bench and pressure from business leaders. It is safe to say the latest budget would be her ultimate test; whether she can get businesses on board will be the biggest question to ask.

The latest BoE survey is damming, with businesses cutting jobs at a faster rate post-pandemic. It is clear that the effect of increased payroll tax, i.e. higher national insurance, is causing businesses to roll back on unemployment. With stubborn inflation and tougher market conditions, there is no choice but to look at the labour as a way to alleviate costs.

Why it matters to you

Rachel Reeves has a black hole to fill, which is the large fiscal (national) debt left by the previous government. Investors are beginning to worry about how she is going to service this debt. The previous government (Liz Truss)  tried to appease the public with their discretionary fiscal policy, but investors were quick to disapprove this with the bond market ramping up, causing the BoE to hike interest rates at a quicker pace.

The upcoming budget will be listened to and judged by business leaders and investors. If anything, the reaction of the FX market will tell the story of whether investors will approve of her plan. It is one that households must look out for. Any surprises can create economic shocks, which could be a Liz Truss 2.0 moment.

What you should look out for

Three things that you should look out for:

1. Her language – the purpose of the budget is to appease the public and business. This budget is important since it needs to provide confidence for businesses. Higher confidence leads to investments; therefore, unemployment will start to fall. Will she try to relate to businesses or focus on the black hole?
2. Her tools-  It’s okay to spend, but where is she going to get the money? The latest rumours are about property taxes and bank profits.
3. Official of National Statistics – Do they agree with her budget? What is the outlook of the budget from external sources?

A storm is brewing, but whether Reeves can weather it – or whether this Christmas could brig another financial chill.