The John Griff Column: Words, and Figures

The Budget had been speculated about, briefed in – leaked perhaps – for a while. Soundbites and sweeteners came soon after the Prime Minister’s warnings of tougher times ahead had been uttered weeks ago, and in his Downing Street briefing on Monday morning. Was it a PM plea to the electorate or a pre-emptive defence of policy which will have material impact over years to come? Both? Tuesday’s announcement of additional funding for the NHS ‘…the lifeblood of the nation…’ to quote the Chancellor, looked like it had been stage-managed to follow Sir Keir Starmer’s bleak overtones 24 hours earlier, and crucially BEFORE the budget. ‘Fixing the foundation’ will be a clarion call in the coming weeks and months. Where and how well the foundations get fixed will be for another day – and probably another year. But for whom were the messages really?

That’s a different question altogether.

Although delivered to the domestic media for onward transmission to the nation, the comments of the Prime Minister AND the Chancellor will have been made with one eye on the rest of the world, and the markets. Neither sleeps, and Britain’s standing in both arenas has greatly diminished compared to a decade or two ago. Our ‘Special Relationship’ with the US seems to have been much eroded since the days of Ronald Reagan and Her Majesty The Queen riding on horseback together, too. The Presidential Election which takes place next week will deliver an outcome of global significance, however it goes. Britain has to court Trump and Harris for the good of its security and its economy, so dealing with matters here at home right now is quite the game of poker.

It’s the same with the markets. They too will be hugely affected by matters taking place across the pond. Depending on the figures you read and the metrics you accept, the financial and associated professional services industry contributed £244 billion to the UK’s Gross Value Added figures in 2023. Our current account deficit widened to almost £572 in June of last year (figures: ONS), but it’s a massively important sector and one still with global influence on the passage of money around the globe. Keeping the markets happy – or at least reassured – is a constant challenge for any government managing the domestic economy. Announcing changes in direction multiplies the challenge. Likewise, the Bank of England which makes its own decisions, independent of government policy or dogma. For the current government, staking a claim to fiscal credibility after 14 years of being outside the decision-making circle will be the tightest of tightropes to walk and achieve balance in the longer term.

All of which begs a question. How far do governmental (or opposition) statements have a material impact on the economy, regardless of any interventions by The Chancellor or the Treasury? Judging by what the Prime Minister has been saying this week (and other Prime Ministers have said in their turn), there is quite the expectation. The government is positioning itself as the honest broker, creating commentary on what went before and establishing a base line for the future through its own activities. With the budget declared, we’ll soon see whether it was a case of ‘we told you so’, or ‘look how things are turning out better under our stewardship of the economy’. Look out for those reassuring references to foundations being fixed. Naturally the other side will be looking to find any stumbles they can pounce on, such is the way with modern day politics. But then look at what the markets do – it’ll be the real acid test.

Right now, we’re all looking at the pound in our pockets and wondering how much of it is actually ours. Changes in taxation - direct or indirect - will have the economists and journalists forecasting and commenting for weeks to come. But it’s the trading floors of cities around the world and the plush carpeted conference rooms in Washington where the forecasts and words will really find their audiences.