Macrodose Budget Breakdown Special w/ Carys Afoko and Hannah Peaker
Nov 26, 2025
Carys Afoko, a podcast host and political commentator, and Hannah Peaker, Deputy Chief Executive at the New Economics Foundation, join the discussion on fiscal strategies following Rachel Reeves' budget. They delve into the implications of the OBR forecast and the need for immediate tax expenditure to alleviate cost-of-living pressures. The duo critiques Labour's political choices, particularly the missed opportunity to enhance welfare support, and celebrates the abolishment of the two-child benefit cap. They also examine the paradox of low taxation on banks amid soaring corporate profits.
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Headroom Over Growth
- The OBR forecast confirmed the economy is stuck in low growth and weak productivity.
- Rachel Reeves is using new tax revenue mainly to build 'headroom' rather than boost demand or investment.
What Headroom Actually Means
- Headroom means the government is borrowing less than its allowed limit, creating a buffer.
- That buffer reduces current spending and can depress growth when the economy is already stagnant.
Prioritise Targeted Spending
- Spend some of the raised revenue on cost-of-living support instead of purely saving it as headroom.
- Use targeted spending now to relieve households and sustain demand rather than deflating the economy.