As the UK grapples with continued economic uncertainty, rising living costs, and political realignment ahead of the next general election, the Spring Statement has taken on even greater significance. In this special episode of Grayling Vantage Point, listeners are treated to a high-level analysis of the Chancellor’s statement—what was said, what was unsaid, and what it all means for Britain’s future.

Featuring Mehreen Khan, Economics Editor at The Times, alongside Grayling’s senior advisers John Lehal and Tanya Joseph, this episode goes beyond headlines to provide strategic insight into the government’s fiscal direction, political motivations, and the real-world implications for citizens and businesses alike.

Whether you’re a policymaker, journalist, business leader, or voter trying to make sense of it all, this expert conversation is essential listening. Plus, you’ll find the full transcript below for easy reference.

Full Transcript

Hello and welcome to the Vantage Point Podcast from Grayling. I’m Tanya Joseph, a board member at Grayling UK and this week we are talking about the spring statement. And we really want to discuss and have a chat really about its significance. I’m joined today with two leading political next and economic experts, our very own John Lehal and Mehreen Khan. John is a former Chief Operating Officer at the Labor Party, and is a fellow board member with me at Grayling. Mehreen is the economics editor of The Times. Thank you very much for joining me, and I hope we are gonna have a great podcast. Let’s begin with your initial response to the statement that Rachel Reeves gave yesterday in a few words, how would you sum it up? Mehreen?

In really few words, I think I described this morning as she’s running standstill. That’s the nature of the fiscal quagmire that the government is in and this difficult trap they’re in that every six months they’re having to announce policies to make sure that they’re meeting their self-imposed fiscal rules.

We can talk about why they’re deciding to do that. And if you do decide to make that your priority, what are the other things that you have to sacrifice in order to maintain, as she said, ironclad commitment to fiscal rules.

I mean, it wasn’t a surprising statement from my point of view, and I think it all goes back to the inheritance that Rachel Reeves is building upon, everything from public services being cut to the bone, low morale, low productivity, low growth.

Yes, those are rules that she inherited, but also just low investor confidence, low levels of investment, debt has doubled in recent years and therefore got a service that interest. You know, this is the reality of where she finds herself. Everything that she did was in response to that.

There’s some of those things that she can do very little about. So, yeah, not surprised, but it was still, from my point of view, I felt sufficiently reassuring to the markets in particular, that she’s doing everything she can to grip this and creating enough headroom for herself in the prices as well.

Tanya: Lots of people have talked about her speaking to the markets. For me, one of the things that I think is difficult when you’re standing up in the the House of Commons is to think about your words as just being for the markets, you’re speaking to the whole country. And I wonder whether you think that she did enough speaking to the whole country there yesterday?

John: I think some of this is difficult there because there are painful things that we’re having to do. Sometimes it’s tricky to explain some of that. I know it’s one of the challenges that the government is finding about how they can get on the front foot with some of this messaging. But ultimately, that it is painful.

There are always going to be unintended consequences, or there are people who are going to have to find that their services are cut or that they’re paying more tax in, in different ways, whatever it might be. It is tricky for the government from a communications point of view. From a political point of view, we see that reflected in opinion polling data, but ultimately this is about the long term.

And, you know, government is about prioritisation. It is about making tough decisions. And I think that’s what we’re seeing, in abundance with this government and a willingness to face into those challenges and make tough and difficult decisions as unpopular as they may be, but thinking in the long term interest of the country.

And I think that’s what we’re seeing from Rachel Reeves with a spring statement.

Tanya: Before we get into the detail, is there anything about the statement that surprised you?

Mehreen: If we are going back maybe three or four months, then there is more than we would ever expect because Rachel Reeves did not want to be in a position where she had to announce anything at all apart from the forecast from the OBR.

So in some senses it actually was upgraded. To a statement from just a spring update. It definitely wasn’t mini budget ’cause we’re not allowed to have any of those after the one we had in 2022. So in that sense is it was more substantive than she would’ve liked and it was much more painful.

I would respectfully disagree with John. I think the communications has been a disaster. This chancellor has had three fiscal moments since labor got into office. One was the black hole moment, as soon as they got elected, which was all overshadowed by winter Fuel payments. Then we had the October budget, which was very much overshadowed by Employee X.

Now we’ve had a spring statement, which wasn’t supposed to be a fiscal moment, has ended up being one, and it’s dominated by welfare cards. I’m not saying this is anything to do with Rachel Reeves in particular. I don’t think she’s doing a particularly bad job. There is a degree to which she has been dealt a bad hand, but I would argue that if we’re talking about inheritance, really Rachel Reeves is living in the shadow of Liz Truss, just like Jeremy Hunt did before her, and that’s a shadow that she cannot get out of, and she’s somehow managed to design a system, which means she’s still stuck in that moment of having to continuously reassure markets that the UK is a fiscally credible country. We could talk about whether or not the markets have been convinced. I think we all looked at guilt yields on Wednesday afternoon and thought they haven’t moved.

So this is a success in the longer run. I spent my day this morning talking to people whose job it is in the city of London to trade UK government bonds. I would say that like most of us, they remain unconvinced. There’s never really going to be a moment where we can say we have won back fiscal credibility.

That’s the difficulty that this government has found themselves in, because if they’re continuously making the trade off between applicating markets or doing things that they’re domestic voter based wanted, and they continuously. Choose the market side, particularly in the early years of their mandate.

I think ultimately that just erodes the other part. And as soon as we get close to an election, there will be a lot of bad faith and a lot of trust that they’ve lost in this process. And I think that’s the political calculation, which is just very, very difficult.

And John’s very keen to come in. I do hope that we can come back to the question of the communications because I agree with you. I think it’s been. fundamentally flawed since the get go.

John: Well, I think a couple of points. Firstly, on the communications point, one of my reflections might be that where you had things like the winter fuel allowance, what the government has failed to do is say, yes, we’re taking away 200 pounds.

Winter fuel allowance from those who can afford it. But importantly, pensions going up. Thanks to our commitment to the triple lock, they’ve not developed that argument. National Insurance contributions, again, most small businesses, 800,000 small businesses and not paying any more national insurance employers.

That message hasn’t got out there. And so then when the media are going out there and talking to people, the high street business, the coffee shop, a lot of those would not be impacted, but they think it is. And obviously it’s a policy that’s coming in from next week. I feel that there’s probably more the work that government definitely needs to do around getting on the front foot with some of that. And likewise, I think, you know, some of the positive messaging we need to be getting out there. They tried to do that a bit yesterday, but look, the fact that breakfast clubs are happening, waiting lists are falling, all these things that were promised by the government at the last general election, we started seeing that change happen.

But I think a lot of it is overshadowed by the economic situation as well as the global events that we find ourselves in. I think one nice ray of sunshine that the chancellor talked about yesterday was around the positive and the answer to your question about the surprise, was about the positive that’s coming out of all the National Policy Planning framework, the house building that’s happening, the long-term growth that will lead to the planning infrastructure bill.

We saw that announced in the last few days with additional investment in social and affordable housing. More training up people, 60,000 young people in skills in the construction industry. So these are good, positive long-term stories that we can talk about. I’d like to see the government getting out there on the front foot.

Yeah, talking about this more. I think they’ve really, really done of themselves a bad turn on the comms side, you know, winter fuel came out of nowhere. No prep, no discussion. Personally, I don’t think it’s a bad idea. I think it’s probably the right thing. There are a load of rich, older people that really don’t need it.

It shouldn’t have come a surprise. This, the Labor Party is probably the only party that can reform welfare that has license to, it shouldn’t have been a conversation. They started on quite hard right wing terms a few days ago. It should have been a conversation we should have been having for a while.

So I personally think the communications have been really poor. The policies not necessarily as bad as they seem. But I think the, the stuff about capital spend yesterday is completely overshadowed. No one’s really picked that up, and I think we need to, the government needs to give more of that , the vision for the future, which brings hope.

Tanya: Do you think the public gonna feel reassured at all by what the chancellor has said?

Mehreen: Again, it comes back to, you know, what is the wider narrative around yesterday? So it was about changing world. It’s about more spending and defense. It’s about ultimately bridging that shortfall that we find ourselves in and finding that.

And there’s some stories about welfare cuts. They’re like the headline things that if you picked up a copy of The Times this morning, probably where you lead in terms of where you want the public to feel and understand. Ultimately, this is about a message about economic security.

It’s about leaning into the things that Rachel Reeves said in opposition about, “I will not play fast and loose with the public’s money. I will not make reckless decisions as we saw under Liz Trust”. As you say, that is the the legacy in which we find ourselves. But I think that’s ultimately where they’ll look to the government to say, are they doing everything that they can to reassure me that they’re doing, making sensible, long-term interests that are sustainable for us and for working people?

And I think they’re doing that. But there’s also some positives. There are things like the living wage, national minimum wage increasing from next week. These are all positive stories that will mean that ultimately working people have found more money in their pockets.

Tanya: We want to make sure they feel that. That’s where again, the communications is so important around that. And Mehreen, do you think that businesses are reassured?

Mehreen: There was nothing really in yesterday that would move the needle on businesses. Businesses are still sort of reeling and complaining about the next increase in October, which is coming in on April 1st.

In a couple of days, this wasn’t a classic budget, so not the tax fiscal leavers, which were not really moved. I think when it comes to the ordinary person, or let’s say a reader, my ideal reader or someone who I think would want to open The Times and think about how this will impact them?

I think it’s a seriously bad look when welfare changes that Labor’s making is going to drag 250,000 British people into poverty, tens of thousands of those being children, it’s a bad look when the Resolution Foundation, the next morning has to say that the poorest half of working people in the UK will lose 500 pounds on average because of the benefit changes that have been announced. It’s a really bad look that 24 hours before you’re supposed to do a budget, the OBR tells you you’re not going to save as much as they thought you did. So you then announce further freezes on parts of benefits so you can meet this magical fiscal headroom thing.

You know, the question is, is the fiscal tail wagging the policy dog? Is the government reverse engineering its policy choices because it’s got this magic fiscal headroom target that it wants to meet. The whole irony of this headroom issue is that she’s left herself basically still nothing.

That nothing disappeared from October to March. And if we think about where the things are now, she’s already lost half of it. Between now and when the OBR last took its forecasts, right? So she actually knows this painfully work back headroom that she’s got, which I think will have massive political costs for this government, is just not even sufficient enough to, as I said, to allow her to stop running, to keep still, because by the time October comes round, we’ll have to ask the question that the interim period is gonna be dominated by speculation about which taxes are going to get, have to get raised between now and the October budget. And you mentioned communications, and I know you guys are the the experts, but from an economic point of view, communications actually matters.

It has a substantive impact on the way people feel. We know that people in the UK are saving more than their spending, and they’ve been doing that since the pandemic because they’re just worried about the world. The uncertain world. Messaging does have an impact on how people, whether businesses choose to invest today or just think, “I need to hold off because every time I turn on the news, something even worse has happened in the world”. Whether it’s tariffs or wars or commodity prices. And the Chancellor obviously is correct to highlight that, but it does have an impact on what we call sentiment. And sentiment ultimately can translate into economic reality. And that’s the other problem that Labour have had. Switching from their very gloomy messaging at the beginning, all the black holes, the bad inheritance.

Then in January they were like, we need to change messaging. It’s all gonna be positive. Let’s do boosterism. Let’s cut regulation. Let’s bring investment in. They’ve already flip flopped. And you know, I don’t blame the ordinary reader or anyone who listens to a podcast, I just think these guys don’t know what they’re doing.

You know, I mean, and, and I’m saying that as a, as a sort of, you know, someone who’s just the average taxpayer or someone who, who consumes the media, not as somebody who’s trying to think about the economics of it. But I think it’s been a very, very chastening start to life in government for, for the chancellor.

When you’ve got a government that spends £1.5 trillion, obviously it is the responsibility of that government to come along and think, where do we come? How do we make some savings here? And we are looking at that. We are looking at where there are areas that we can increase tax and some of that happened in the budget, but also I think it’s pretty right and reasonable to say, well, let’s look at some of those bigger trends that are going on in society.

And we have seen people in work, on health related benefits, just increasing over a consistent period of time. And we’ve got to tackle the root of that. That’s what this government’s got to do. And I think that’s probably where they’ve said this a lot during the general election, campaigning before was enough of the sticking plaster politics.

I think we’re just trying to get to the root cause here. So when you’ve got one in eight young people who are not in employment or education or training, we need to make sure we get those people back to work. And that’s why you do things like the construction, skills announcement, that you had the other day.

Look, now that is what it’s about, about making sure that you’ve got long-term solutions in place and dealing with these things. And you know, we cannot write off a whole generation. No one, no young person, should be written off because we’re not making the most of their opportunity we’re not giving them. The opportunity to realise their full potential. And I think for too long we’ve done those kind of things and I think that’s going to look far more long term. Now, you know, you can make an argument as to whether we’ve rushed this upon the public, whether we could have done more laying the ground.

But ultimately, I think these are the kind of things that we’re looking at in terms of longer term solutions to put in place.

Tanya: So thinking about if you are running a business, large or small. You can wake up this morning and think, well, this is just we’re in a terrible mess. Welfare’s being cut. People that are buying my products won’t have the money to continue to buy them. You can see why people might feel a bit bleak about things. What do you think? If I am running a business, what do you think I should be doing to make sure that my voice is being heard and are there still things to play for as well?

I suppose, you know, it is like, is this it now? Is this, government’s got no money. It’s pretty hard. I’ve just got to, you know, be passive and wait.

John: No, this is one of the things that we at Grayling are very good at, we look very much in a sectoral basis to where those opportunities are.

So, you know, anybody in construction, infrastructure, housing a great opportunity. The government landscape is very much from a regulatory legislative point of view. A point that Rachel Reeves made yesterday was that the National Policy Planning Framework, which is about building more houses, Greenbelt Gray Belt, hasn’t cost a single penny of taxpayer money. That’s where businesses want to be coming in with those solutions. There’s a real deregulatory reflex within the government. What do those things look like in your sector? Obviously the defense industry has done very well in yesterday’s announcement. How do we make sure that’s felt on a regional inclusive base? I think there’s the chance to set up a task force. To look at that, to make sure that it’s something that then leads to jobs and growth across the country. So I don’t think it is all doom and gloom.

And I think the other thing is that I hope businesses are thinking about is where the government’s talking about working with Job Center Plus and, employer organisation and what more are they doing to create a workplace in which people who currently aren’t in work. What training opportunities, how are they embracing apprenticeships, learning opportunities, skills for young people, etc.

There are opportunities, and it shouldn’t just be quite reductive to think about all the doom and gloom. We are in a difficult place. We do have to make tough decisions, but I think the opportunities are great, not least around those that are looking to invest in the UK.

I mean, not to hark on about the doom and gloom ’cause I think you’re right. I think there is great opportunity to, to think, okay, this is where we are, but there is gonna be a massive capital spending program. The increasing in defense spending. If we can make those things here, that’s brilliant for us.

Tanya: Brilliant for this, for skills, for young people, for communities up and down this country. The thing that, that she has no control over, it would feel like is what happens if we enter into a trade war with the United States. I suppose just as we come to an end, you know, what John, do you think the government is doing to reach some kind of compromise, some kind of deal where we aren’t gonna feel the the brunt of the United States Administration.

John Lehal: The thing that we know about Trump is he’s very much a people person. He wants to trade and negotiate, and he wants to win. We’ve got to make sure that, and actually, as a result of us not being members of the EU anymore, there’s something that, there is a scope to do a deal for the UK that is in the interest of the UK automotive industry when we’re thinking about those 25% terrorists from yesterday, but also looking wider at that potential of some kind of economic prosperity partnership trade deal, for want of a better word, that we’re talking about. And I think it’ll be upon the likes of Jonathan Reynolds and Rachel Reeves and others to work out what that landing zone is for that deal. Obviously the digital services’ tax is one that’s on the table that’s been talked about.

That’s a billion pounds of the headroom of the £15 billion a headroom that the Chancellor has created. But look, you know, if it saves our automotive industry, it means that we’re not having 25% tariff on a £6 billion industry. That’s definitely the kind of thing that I think we want to be negotiating on.

That’s where we’ve got, I think the people in in the room now are very practical and pragmatic about that stuff in the same way as Trump and his advisors will be. And so that’s where I think we’ve got scope for, for those things. What we definitely need to do is dial down some of this.

And I think we’ve seen seeing this straight away, the EU underline, were out there talking about Retaliatory terrorists. I just feel that’s really unhelpful when we know the kind of people we’re negotiating and dealing with here. Where there is scope to do a deal, let’s see what that looks like and let’s see if we can land that.

Tanya Joseph: Does that chime with, with your analysis?

Mehreen Khan: Yeah. I mean, as we’re speaking right now, there are frantic negotiations going on. To get the UK exempted from the April 2nd reciprocal series of tariffs would affect the industry. The UK is probably much better positioned to do some kind of small agreement that allows it to escape the worst of the tariffs.

In reality, the UK will escape the worst of the tariffs. We have a trade deficit. Depending on whether you believe US statistics or UK statistics, we don’t know how big or small that is. Ultimately it will affect certain sectors. The cast industry should be worried, but generally we are not an economy that is gonna be massively implicated by the economic impacts of tariffs.

Having said that, I think whatever the deal is, there is a messaging. Potential pitfall. Trump has behaved in odious ways towards his allies, if this government is seen to be able to give him his golf courses, his royal visits, getting big tech companies exempted from the UK digital services tax, which came in at a time when the EU failed to do it, and Boris Johnson’s government went ahead with it.

It was very popular in this country because of what we think of the under taxation of massive multinational Tech companies. If the Tesla subsidies continue, despite the fact the things that Elon Musk has said about this country and this Prime Minister, it’s an issue if we are seen to be supine at the hands of this bully.

As John said, the EU is being aggressively retaliatory. But that also works because that’s what the Mexicans and the Canadians did, and they warn themselves reprieves. In some senses, we know that Trump wants to do deals, but he also appreciates aggression and chauvinism that he has in, and of, himself from his own negotiating partners.

He doesn’t enjoy weakness and he senses weakness. It’s a difficult balancing act. I’m sure that if there is any kind of arrangement, an 11th hour arrangement where the UK manages to get itself out of this tariff, exposure, it’ll be sold as a massive win, a diplomatic win. But I would very much look at the details of what we’ve offered him to be able to win those exemptions.

It is important because Trump is, as I said, the way that he behaves is having an impact on how he’s perceived in Europe and across allied countries of the US. He’s spurred massive policy changes already in Europe and the UK will have to decide where it wants to sit in this spectrum of how to clap back at Trump.

Tanya: Right. Your last question, your ten second advice for the Chancellor following this statement. John, you go first.

John: You go first.

Mehreen: Very, very controversial. I think at some point, dump or change your fiscal rules, they’re forcing you into pernicious political choices that are just, I don’t think are worth it in the long run.

John: You’re playing the long game Chancellor. There was always an acceptance. It’s got to be some short-term pain and that’s precisely what we’re doing. But keep the positive growth boosterism messages and make sure you’re delivering for working people. That’s exactly the privilege that you have in serving the country. And that’s exactly what keeps you motivated to keep going.

Tanya: Thank you very much.