One of the more bizarre questions around Wednesday’s Budget is: Has Rachel Reeves caught a ‘snuffle’?
The BBC and others are suggesting that the biggest fundraising change will be an increase in the National Insurance rate for employers, and a lowering of the threshold at which they start paying it.
Employers currently pay National Insurance of 13.8% on a worker’s earnings above £175 a week and, according to the BBC,
A two percentage point rise in National Insurance to take the employer rate to 15.8%, for example, would raise about £18bn a year according to published Treasury data.
However, with Reeves also expected to change the threshold businesses start paying the levy, such a figure would probably be higher.
But ITV political editor Robert Peston reckons Reeves may do something more ambitious, by changing the government’s target from lowering public sector net debt to attacking public sector net financial liabilities (PSNFL, or “snuffle” – “with a silent ‘p’, as in ‘Psmith'”).
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He tweeted on X: “The simple way to understand the difference is that public sector net debt is gross debt minus some super liquid investments whereas PSNFL subtracts a greater range and larger stock of assets.
“The problem with the target Reeves inherited from her predecessor Jeremy Hunt is that it gives her almost no “headroom” to borrow to fund investment.
“PSNFL creates this headroom – as if by miracle – in two ways.
“1) It includes the £20bn annual flow of loans to students as both an asset and a liability, whereas in PSND ex Bank those loans are treated only as a liability.
“2) It excludes government losses on the Bank of England’s sales of government debt known as gilt-edged stock.
“The impact of including the value of the student loan book is the more important of these two.
“Together they represent the biggest share of an increase in the capacity of the Treasury to borrow every year to the tune of between £50bn and £60bn, according to the Resolution Foundation and the Institute of Fiscal Studies.”
£50-£60 billion? “These are big bucks,” tweets Peston – and he’s right.
It “will allow Reeves to invest billions of pounds every year – in transport, and power generation and electricity networks – through her National Wealth Fund and GB Energy, and in partnership with the private sector, relatively unconstrained by her debt target.”
But “if the government were to own 100% of an investment project, in the way it typically does, then the value of that investment would not be netted off PSNFL. Or to put it another way, adopting PSNFL does not allow for an unlimited investment bonanza.
“It creates space for investment, but constrained space… She won’t have a bottomless purse.”
And “if investors were to fear that the additional debt Reeves will incur will not spur growth, and instead will be more money down the drain, they won’t want to lend to her. And we’ll find ourselves in the Truss/Kwarteng vicious cycle of interest rates being forced up and choking off desperately needed economic momentum.
“Which may be why Reeves is looking a bit pale and drawn: there is a risk that doing the snuffle shuffle could lead to an almighty markets kerfuffle.”
All of this may well be true – if Reeves takes that path.
But we don’t know what she’s going to do. It’s all speculation.
The best This Writer can say is: buy popcorn for Wednesday. It may be one of the last times you can afford it.
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Has Rachel Reeves caught a ‘snuffle’?
One of the more bizarre questions around Wednesday’s Budget is: Has Rachel Reeves caught a ‘snuffle’?
The BBC and others are suggesting that the biggest fundraising change will be an increase in the National Insurance rate for employers, and a lowering of the threshold at which they start paying it.
Employers currently pay National Insurance of 13.8% on a worker’s earnings above £175 a week and, according to the BBC,
But ITV political editor Robert Peston reckons Reeves may do something more ambitious, by changing the government’s target from lowering public sector net debt to attacking public sector net financial liabilities (PSNFL, or “snuffle” – “with a silent ‘p’, as in ‘Psmith'”).
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
He tweeted on X: “The simple way to understand the difference is that public sector net debt is gross debt minus some super liquid investments whereas PSNFL subtracts a greater range and larger stock of assets.
“The problem with the target Reeves inherited from her predecessor Jeremy Hunt is that it gives her almost no “headroom” to borrow to fund investment.
“PSNFL creates this headroom – as if by miracle – in two ways.
“1) It includes the £20bn annual flow of loans to students as both an asset and a liability, whereas in PSND ex Bank those loans are treated only as a liability.
“2) It excludes government losses on the Bank of England’s sales of government debt known as gilt-edged stock.
“The impact of including the value of the student loan book is the more important of these two.
“Together they represent the biggest share of an increase in the capacity of the Treasury to borrow every year to the tune of between £50bn and £60bn, according to the Resolution Foundation and the Institute of Fiscal Studies.”
£50-£60 billion? “These are big bucks,” tweets Peston – and he’s right.
It “will allow Reeves to invest billions of pounds every year – in transport, and power generation and electricity networks – through her National Wealth Fund and GB Energy, and in partnership with the private sector, relatively unconstrained by her debt target.”
But “if the government were to own 100% of an investment project, in the way it typically does, then the value of that investment would not be netted off PSNFL. Or to put it another way, adopting PSNFL does not allow for an unlimited investment bonanza.
“It creates space for investment, but constrained space… She won’t have a bottomless purse.”
And “if investors were to fear that the additional debt Reeves will incur will not spur growth, and instead will be more money down the drain, they won’t want to lend to her. And we’ll find ourselves in the Truss/Kwarteng vicious cycle of interest rates being forced up and choking off desperately needed economic momentum.
“Which may be why Reeves is looking a bit pale and drawn: there is a risk that doing the snuffle shuffle could lead to an almighty markets kerfuffle.”
All of this may well be true – if Reeves takes that path.
But we don’t know what she’s going to do. It’s all speculation.
The best This Writer can say is: buy popcorn for Wednesday. It may be one of the last times you can afford it.
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
you can make a one-off donation here:
Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Join the uPopulus group at https://upopulus.com/groups/vox-political/
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
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