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The Economics Show
How big a fiscal hole is the British government in? With Paul Johnson
Mar 24, 2025
In this discussion, Paul Johnson, Director of the Institute for Fiscal Studies, dives into the UK's pressing fiscal challenges. He analyzes the aftermath of stagnant economic growth and rising borrowing costs faced by the government. As defense spending escalates, he weighs the implications of breaking tax pledges. Johnson critiques the government's growth strategies while assessing the balance between defense needs and welfare commitments. Listeners gain insight into the future of public finances and the necessity for transparent fiscal policies in turbulent times.
31:02
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Quick takeaways
- Rachel Reeves, as the first female Chancellor, faces significant challenges in maintaining fiscal commitments while addressing stagnant growth and rising borrowing costs.
- The Institute for Fiscal Studies underscores the need for transparency in government fiscal policies as defense spending increases amidst economic uncertainties.
Deep dives
Challenges Facing Britain's First Female Chancellor
Rachel Reeves, the first female Chancellor of the Exchequer in the UK, faces considerable challenges as her government promised not to raise key taxes while simultaneously boosting public investment. However, growth in the UK has stalled, and rising inflation has led to increased government borrowing costs, complicating her fiscal strategy. The Chancellor now must navigate a tighter fiscal landscape and a potential increase in defense spending, all while adhering to her government’s fiscal commitments. The question remains whether she will need to alter these commitments or raise personal taxes to address the financial shortfalls.
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