{"id":592667,"date":"2025-11-25T11:04:18","date_gmt":"2025-11-25T11:04:18","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/592667\/"},"modified":"2025-11-25T11:04:18","modified_gmt":"2025-11-25T11:04:18","slug":"brexit-trump-truss-or-reeves-experts-on-whos-to-blame-for-stalling-the-economy","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/592667\/","title":{"rendered":"Brexit, Trump, Truss or Reeves? Experts on who’s to blame for stalling the economy"},"content":{"rendered":"

Chancellor Rachel Reeves has already started laying the groundwork for who she will blame for the parlous state of Britain\u2019s economy as she prepares a tax-raising Budget on Wednesday.<\/p>\n

Austerity under the last Tory government has come up, as has the Brexit deal<\/a>, former prime minister Liz Truss\u2019s mini-Budget and a world economy upset by Donald Trump\u2019s tariffs.<\/p>\n

But according to many leading economists, it is Reeves herself who is to blame for her own Budget woes<\/a> because she did not do enough to protect herself from the impact of any of these.<\/p>\n

New FeatureIn ShortQuick Stories. Same trusted journalism.<\/p>\n

Reeves has pointed the finger at decisions made by the previous Conservative government, in particular the policy of austerity and the vote to leave the EU, claiming that they have damaged economic growth<\/a> by more than previously expected.<\/p>\n

She has also complained about the effects of global economic volatility, stoked partly by Trump\u2019s tariffs \u2013 and about the lingering effects of Truss\u2019s 2022 \u201cmini Budget\u201d which sent Britain\u2019s borrowing costs soaring.<\/p>\n

Reeves \u2018must explain what has changed since last year\u2019<\/p>\n

\"Britain'sThis will be Reeves\u2019s second Budget since Labour won power last year (Photo: Justin Tallis\/AFP)<\/p>\n

Multiple top economists told The i Paper that the Chancellor was right to identify all those factors as reasons for the UK\u2019s weak growth, which makes the public finances harder to add up.<\/p>\n

But they added that the impact of austerity, Brexit and Truss\u2019s time in power have been known for many years \u2013 while even Trump\u2019s arrival did not come out of the blue.<\/p>\n

Andrew Goodwin of Oxford Economics said: \u201cThree of those factors are historic factors, only one of them has emerged since the last Budget so she has to explain what has changed since the \u2018take out the trash\u2019 Budget.\u201d<\/p>\n

Stephen Millard of the National Institute of Economic and Social Research added: \u201cAll of these things that she talks about have not helped the UK economy, but whether it is fair to blame them for the problems at this Budget \u2013 I\u2019m not sure.\u201d<\/p>\n

At last year\u2019s Budget and the Spring Statement of this year, Reeves left herself \u201cheadroom\u201d \u2013 the buffer she has against breaching her maximum borrowing rules \u2013 of just \u00a39.9bn, much lower than the historical average. Experts said that if she had built in more headroom, she would have reduced the risk of having to raise taxes again in the face of worsening forecasts from the Office for Budget Responsibility (OBR).<\/p>\n

Former Treasury adviser Tim Leunig said: \u201cShe had this bullish Budget that has come back to bite her.\u201d And Ruth Gregory of Oxford Economics added: \u201cHad the Chancellor left the \u00a328bn average that previous chancellors had against their respective fiscal rules between 2010 and March 2024, there would have been a good chance she would still be meeting her fiscal mandate with margin to spare.\u201d<\/p>\n

The Treasury did not respond to a request for comment.<\/p>\n

Austerity and low investment<\/p>\n

\"GeorgeFormer chancellor George Osborne before the 2016 Budget. His austerity measures have been blamed by Reeves (Photo: Chris Ratcliffe\/Bloomberg\/Getty)<\/p>\n

Reeves has said publicly that she expects the OBR to downgrade its expectations for future productivity growth \u2013 putting a hole of as much as \u00a320bn in the public finances \u2013 partly as a result of the Tories\u2019 policy of austerity, which saw Government spending curbed for years in a bid to reduce the deficit.<\/p>\n

She said in a speech last month: \u201cThe OBR, I think, are going to be pretty frank about this \u2013 that things like austerity, the cuts to capital spending and Brexit have had a bigger impact on our economy than was even projected back then.\u201d<\/p>\n

Many economists agree, pointing in particular to the decision to reduce investment in long-term infrastructure projects during the 2010s when borrowing costs were at historic lows.<\/p>\n

\u201cThe Government has received a challenging economic and fiscal inheritance,\u201d Gregory said. \u201cWeak supply (mostly due to slower productivity growth) has continued to restrain activity.\u201d<\/p>\n

But the OBR\u2019s downgrade has been expected for several years, as the official body was much more optimistic than other forecasters. \u201cIt is not surprising that they decided to revise their forecasts of growth down,\u201d Millard said. \u201cThe Chancellor could and should have left herself much more headroom against her fiscal rule, given that she knew the OBR was a bit optimistic.\u201d<\/p>\n

Brexit blows<\/p>\n

Speaking at the International Monetary Fund in October, Reeves said: \u201cThe UK\u2019s productivity challenge has been compounded by the way in which the UK left the European Union<\/a>.\u201d<\/p>\n

Leaving the EU has created trade frictions with our largest trading partner, with a knock-on effect on growth estimated by the OBR at 4 per cent of GDP \u2013 a figure only marginally offset by recent trade deals with Brussels, Washington and Delhi.<\/p>\n

But there have been no new developments since Labour took power last year, which would worsen the economic effects of Brexit. Leunig said: \u201cWe have known Brexit was bad news since economists said before the referendum that Brexit would be bad news!\u201d<\/p>\n

Millard added: \u201cBrexit itself, the uncertainty that was created after the vote, that led to a decline in investment. We had that even before Brexit itself actually happened and firms had to deal with higher trading costs.\u201d<\/p>\n

The Truss effect<\/p>\n

\"LONDON,Truss\u2019s mini-budget saw the sterling fall to its lowest-ever level against the dollar. (Photo: Rob Pinney\/Getty)<\/p>\n

The Chancellor often refers to the chaotic period in which Truss governed Britain as a cause of ongoing economic troubles \u2013 for example, in September, she told the House of Commons: \u201cThe best way to make sure that we continue to have confidence in the gilt markets is to keep the Tories and Truss as far away from running the economy as possible.\u201d<\/p>\n

During Truss\u2019s premiership, the UK saw its borrowing costs spike sharply, and since then, it has been persistently more expensive for this country to service its debts than for other comparable economies.<\/p>\n

Millard said: \u201cThe reason the Chancellor has to abide by these fiscal rules is that if she didn\u2019t, it would make markets jumpy. And the reason the markets are pretty jumpy is Truss \u2013 she said that we were not going to have fiscal responsibility, we would just have tax cuts and hope that would create growth.\u201d<\/p>\n

But the short-lived Downing Street tenure of the former prime minister cannot be blamed for the on-off panic in debt markets that has taken hold this year.<\/p>\n

Borrowing costs have risen worldwide as a result of investors\u2019 worries about the overall levels of government borrowing globally, with UK-specific spikes at times of political uncertainty, including the Government\u2019s U-turn on raising income taxes earlier this month.<\/p>\n

The Trump factor<\/p>\n

The one area where economists have more sympathy with Reeves is the need to deal with a world shaken up by the unpredictable policies of Trump.<\/p>\n

Her pre-Budget speech from Downing Street on 4 November included a reference to \u201cheightened global uncertainty\u201d creating \u201clong-term challenges\u201d \u2013 although she did not risk the anger of the US President by calling him out by name.<\/p>\n

The last Budget came a few days before the presidential election, while the Spring Statement was before what Trump called \u201cliberation day\u201d, when he revealed the scale of tariffs he would be imposing on trading partners, including Britain.<\/p>\n

\t\tYour next read<\/p>\n


\n\t\t\t\"Article <\/a><\/p>\n

\u201cThe Spring Statement came just before liberation day,\u201d Goodwin said. \u201cIt is not on the same level as some of those other factors, such as Brexit, but it is one of those things that makes a difference at the margins. It is a long-run headwind that means we grow less quickly than we would have done.\u201d<\/p>\n

But even this should not have been a total surprise, Leunig insisted: \u201cTrump isn\u2019t obviously wackier than he was a year ago. At the last Budget, it was pretty much 50-50 that he was going to be elected. This is a man who describes himself as \u2018tariff man\u2019, you don\u2019t have to read all the newspapers to know that he was going to put on tariffs.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Chancellor Rachel Reeves has already started laying the groundwork for who she will blame for the parlous state…\n","protected":false},"author":2,"featured_media":592668,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5226],"tags":[802,748,1194,2000,299,5187,1699,4884,1749,7570,619,16,15],"class_list":{"0":"post-592667","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-brexit","8":"tag-brexit","9":"tag-britain","10":"tag-budget","11":"tag-eu","12":"tag-europe","13":"tag-european","14":"tag-european-union","15":"tag-great-britain","16":"tag-liz-truss","17":"tag-politics-long-read","18":"tag-rachel-reeves","19":"tag-uk","20":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115610011511859043","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/592667","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=592667"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/592667\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/592668"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=592667"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=592667"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=592667"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}