Mm-hmm.

So it was, it was a commitment, um, from the Shadow Chancellor that we're not going to see things like this, especially if they're unfunded, again from any future Conservative government, if there is ever another future Conservative government.

But I thought one of the, one of the questions from the press pack made the, the interesting point is, how can you actually make this commitment? Because unless the, unless the Tory party wants to somehow change its leadership selection rules in a way that stops someone that has a sort of Liz Truss view of fiscal policy coming into, into government again, there's nothing you can, you can really do about that.

And the, the, the Shadow Chancellor wouldn't be drawn on that point.

Mel Stride was talking about this morning, I just wondered what are the kind of difficulties in terms of an older population and the economy we are in now?

Any, any leader now is facing a, a completely different sort of demographic and economic picture, I would say, and that you hit the nail on the, on the head there, that every issue we talk about on this podcast and we cover in The Spectator, you know, whether it's housing, the health service, pensions, whatever, it all essentially comes down to that problem, that we've got a, we've got an aging population, we've got a, a shrinking workforce, not just because of the aging but because more and more people are, are out of work due to, you know, mental health and, and different, different problems.

And your economic policies that you, you might come in to shrink the state or to do Thatcherite things, it's not that they're gonna create unemployment in the way that some would argue that Mrs. Thatcher's policies did.

The un- the...

This fits with the general trend, doesn't it?

Yeah, absolutely.

And to be fair, you know, the, the government can't affect a lot of these changes because the, you know, the utility bills, they're just linked to, um, inflation.

Uh, so as in, as inflation is up, uh, so, so too do bills go up.

But that will kind of feed into a circular effect, which in itself will push inflation up.

There's a report out this morning that expect that it's gonna be well into next year, possibly even 2027 before inflation gets, um, back down to that target.

The other thing that, um, the government is gonna be worried about, you know, as Katie mentions, tomorrow is, um, tariff day, or as Donald Trump is calling it Liberation Day.

Mm.

Michael, on those tax rises and potential spending cuts, Rachel Reeves was on the broadcast round this morning categorically saying that that will not happen, but do you think that's pretty much inevitable looking towards autumn?

Yeah, yeah, I mean listen if it doesn't happen this autumn it will happen in whatever the next major fiscal event is, um, you know, after that.

And it's because of this, this headroom point.

I think the, the most remarkable thing for me about this Spring Statement yesterday is how she's literally gone from the headroom she had after the autumn budget, 9.9 billion, the OBR says underlying forecast changes wiped that by 4 billion, so a swing of 14 billion.

And when they say underlying forecast changes, that's referring to the high gilt yields we saw at the start of the year, the downgrade to the growth forecast.

(laughs)

Um, I mean, uh, on a, on a sort of statistical sentence comparing two spreadsheets we will be, um, I've been scouring through the sort of blue book, um, you can't see it but I'm, I'm holding, holding it in my hand now, and they've got this 500 pounds figure from something on, um, page 36 about household disposable income, and essentially what it is, it's quite a, it's quite a cheeky claim.

It's in 2029, so in, when's that, is that five years' time, four years' time, at the end of the OBR's forecast, they've said that because the growth, tiny growth, in disposable income is slightly higher than what they forecast at the October, um, budget, that will be a difference of 500 pounds.

Hello, and welcome to Coffee House Shots, a Spectator's daily politics podcast. I'm Katy Balls, and I am joined by our new economics editor, Michael Symonds, and an old Coffee House Shots favorite. That's not me saying you're old, by the way, just that you've long loved. Stephen Bush from the Financial Times. Thank you both. Michael, just to kick things off, we have had the much awaited announcement today from Liz Kendall in the Commons Chamber of the government's plans for, um, welfare reform. Talk us through the main announcements and how they corresponded to what was briefed in advance.

Yeah. So there's a mix of things, and it's, it's sort of come, uh, carrot and stick. Uh, and if we start with the carrot, some of the changes are that, uh, UC is going to be put up, um, above inflation, so that's gonna mean that UC payments are gonna go up by about £775 sort of per claimant. Also, people who suffer from the kind of worst, most debilitating illnesses are not going to be subject to continual reassessments. They're just gonna be assessed once and as- asse- effectively left alone on the benefit. And that's something that disability campaigners have been calling for and sort of wasn't announced. On the other side, PIP is going to be tightened up, so you're gonna need a h- a higher score. PIP works on v- you know, various scoring depending on your disability to get different elements of it and to get different aspects of the payment. So that's going to be made, um, harder to get on. The real big change is this work capability assessment, uh, which we've spoke about on the, on the podcast before, which basically puts people on UC and other benefits into categories. You're either fit to work or you're not fit to work. That's for a long time been seen as a big problem, because once you get into the not fit for work category, most people just stay in it. That's going to be, um, scrapped, and then they will just use PIP to decide if people shouldn't have to, have to work because they already have these health conditions. But what sort of wasn't trailed about that, al- although that reform will be welcomed by people who, you know, have been critics of the system, it's not gonna come in until 2028. And, you know, the, the forecasts we've got on the Spectators' Data Hub from the DWP show, you know, thousands and thousands more people falling into the- this category in that time. The real announcement that no one had trailed, I think, is they're gonna make it harder for young people to get on these benefits. Right now, there's something like 266,000, uh, young people who are out of work due to long-term sickness. So the minimum age before you can claim PIP is gonna increase, and then crucially, the age in which you can get the health elements of UC is gonna be set to 22 and above. And the idea is to stop people as soon as they finish school or college or whatever from going straight into a life of being too sick to work. It's gonna try to encourage people into getting into work in the first place.

And Michael, just finally, of course, we have the spring statement next week, and we know that part of the reason they are pushing ahead at the pace they are on welfare reform is a sense that Rachel Reeves' headroom could be gone. How are things looking for the chancellor?

They're not looking great. They're looking probably even worse than when we, you know, first said that the headroom was gone at the start of the year because of increased, uh, borrowing costs in the, in the gilt markets. Although those have recovered slightly, she's had worse news in the... In January, the economy contracted. Um, just yesterday, the OECD have downgraded forecasts for, um, for Britain's growth. It's inevitable that the OBR will make a similar assessment and th- those growth figures going down would further dent what you have there in, in the headroom. And I think it's, it's interesting what Stephen said about OBR policymaking or OBR sort of driven policymaking because one of her ironclad rules is this one about getting, uh, debt as a share of income falling at the end of the forecast period. And I think that's partly why some of these measures don't come in for a few years because it ef- effectively gives them the room to say, "Right, this is gonna happen in a few years to the OBR, costs are gonna come down, that can have an impact on the national debt." But then you've actually got time before then to change the measure or dare I say it, not do the measure at all.

So just how much of a shock will this be to Rachel Reeves? It comes only a few weeks after her growth speech.

Well, most economists and analysts had actually been predicting that the, the year was going to start with growth. They'd forecast very, very minor growth of 0.1% for January, but the actual figure has come in as a contraction of 0.1%. So in a way, you know, that's not a, a huge shock, because 0.1%, like, either side is basically saying that the, the economy is just flat-lining, as it has been doing for a long time now. But I think it's, it's, it's very bad for Reeves, because she needed... January was a month where she started, you know, talking about her growth initiatives. She backed the third runway at Heathrow. And obviously, those things are not going to have an immediate effect, uh, right in that month. But when analysts had been expecting growth, for figures to come in with contraction, you know, is, is not good, and it will have shocked her.

Michael, do you think this, the, the sort of negative news around the economy increases pressure on the Bank of England to cut interest rates?

Yeah. So the, the, the bank's Monetary Policy Committee, who are the, the group of people that set interest rates, um, have their meeting next Thursday to decide whether they'll take the current rate of 4.5% down. And the fact the economy is not growing will be another bit of pressure on those, that group of people to say, "Cut interest rates to, you know, try and, try and get some heat going in the economy." But I think other factors are more important and will weigh on them more heavily, and that's primarily this, um, idea that, uh, inflation is going to resurge. I mean, the, the bank only recently predicted that it could get as high as just under 4%, um, this summer. So I think their fears about inflation will win the day, a-... and they'll see that as more important than stagnant growth. So I think that a cut, uh, next week is quite unlikely. And if you look at market expectations as well, they're expecting the r- uh, rate to- to be held. But, um, now that I've said that, you know, on my first podcast as economics editor, uh-