In this Institute of Economic Affairs podcast, IEA Director of Communications Callum Price interviews Joe Mayes, UK political correspondent for Bloomberg and author of “Can You Run the Economy?” - an interactive choose-your-own-adventure book where readers take on the role of chancellor. The conversation examines Rachel Reeves’ November budget, exploring how she prioritised fiscal headroom and bond market stability over immediate public approval, increasing fiscal room from £9.9 billion to over £20 billion. They discuss the trade-offs between economic stability and political popularity, analysing why Reeves opted for a smorgasbord of tax rises rather than a bold income tax increase.

Mayes explains the constant pressures facing chancellors, particularly the threat of financial markets inflicting higher borrowing costs at any moment. The discussion covers why the UK currently has the highest borrowing costs in the G7 and how this forces chancellors to prioritise bond markets over voters who can’t hurt them until the next election. They explore whether Britain is permanently in a “Mexican standoff” with financial markets given current debt-to-GDP levels, and examine the political risks of a leftward shift that could trigger negative market reactions.

The interview concludes by looking ahead to the challenges facing Reeves before the next budget, including potential leadership threats, international geopolitical risks, and the critical question of whether the government’s domestic growth plan will deliver results. They discuss the difficulty of making economic growth a public totem that resonates with voters in the same way fiscal headroom matters to markets, and whether technological revolution rather than policy will ultimately drive the growth Britain needs.

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The views represented here are those of the speakers alone, not those of the Institute, its Managing Trustees, Academic Advisory Council members or senior staff.

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