Addressing the House of Commons this afternoon for her Spring Statement, Chancellor Rachel Reeves conceded that her sums for the Autumn Budget were out by £14 billion. When you are elected on a platform of competence, and little else, such an error should be fatal.

Back in October, when Keir Starmer’s government still enjoyed a healthy polling lead, Reeves raised an additional £40 billion in new taxes, with most of that coming from a hike in employers’ National Insurance contributions. That gave the Exchequer just short of £10 billion of “fiscal headroom” if growth was downgraded, or the costs of borrowing proved higher than expected. Ultimately, both happened — not only eviscerating the Government’s cushion, but leaving the Chancellor £4 billion in the red.

John Maynard Keynes once declared that the only function of economic forecasting is to make astrology look respectable. Yet even he would struggle to comprehend the ineptitude of the Office for Budget Responsibility (OBR). Nevertheless, its almost-always erroneous predictions remain gospel for decision-makers — the latest of which is a downgrading of economic growth for 2025 from 2% to 1%. Considering the country’s population is expected to grow by 1% this year, primarily as a result of immigration, anything less would mean that the UK is in a per-capita recession.

And it is just such a recession which is the background to all of this, with the OBR confirming that, as the result of a larger-than-expected labour force, productivity at the end of 2024 was 1.3% lower than documented in its October forecast. That means output per person is now 1.1% lower than five years ago. More broadly, British productivity — especially critical in a country with an ageing population — has barely moved for 17 years. Today’s announcements showed that there is little sign of that changing soon.

What’s more, Starmer’s administration appears increasingly frantic and incompetent. Earlier this month, Liz Kendall, Secretary of State for Work and Pensions, outlined cuts to the welfare budget which would give Reeves approximately £5 billion. Yet the OBR determined those changes would raise just over half that amount (allegedly £2.9 billion, to be specific). Kendall subsequently promised even more cuts, but even those took her department’s “contribution” to £3.5 billion. Public spending cuts, like the economy more generally, are in a doom loop. Meanwhile, quangos determine political reality rather than a government with a historic majority. It’s difficult to see how any of this endures in a democratic system.

Britain’s problems in 2025 remain much the same as they have been for the last 15 years: stagnant productivity, an economy centred on London, and expensive energy. In response, the Government cancelled HS2 going north of Birmingham, while signing off on a flurry of projects in the South East, from new runways at Heathrow and Gatwick to the Lower Thames Crossing. Talk of “left-behind” towns and cities, a consequence of the Brexit result, already feels like nostalgia from a distant age.

The Government position on energy, meanwhile, seems increasingly delusional. Speaking today, Reeves said that Britain would become a “defence industrial superpower” under Labour, yet such an outcome is simply impossible for a country with the most expensive industrial energy in the West.

Labour has only been in office for nine months, and the negative trends shaping Britain all date back much further. The focus should therefore shift from Reeves to the role of the OBR, which has been consistently wrong since its inception in 2010. Its purpose seems to be little more than providing cover for the government of the day, and generating material to mislead the public. How else do you explain the fact that, as new housebuilding falls to historic lows, the Government can gleefully talk of reaching its targets?

Rather than a body which scrutinises the Government, we have a quango mystifying what is going right, and more often wrong. Reeves is clearly unfit for her position. But, after today, the case to abolish the OBR has never been stronger.

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Aaron Bastani is the co-founder of Novara Media, and the author of Fully Automated Luxury Communism. 

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China is trying to catch up with America on artificial intelligence. The Wall Street Journal has reported that Zhipu AI — one of China’s six “AI tiger” LLMs — has released a new model that can rival leading US systems, including Anthropic’s Mythos, in cybersecurity tasks such as pinpointing security bugs. While this marks a milestone in China’s drive to catch up with Western AI capabilities, strong performance on a single benchmark does not mean it has taken the lead. Chinese models still lag behind their Western counterparts in broader capabilities, such as autonomous operation. Skepticism is therefore warranted before resorting to hysterical conclusions, but complacency about the geopolitical implications of China’s AI advances would be an even greater mistake.

On the infrastructure side, Chinese AI is still constrained by access to advanced chips, with American labs way ahead in computing capacity as well as investment. Analysis from earlier this year suggests that Chinese models are likely to be at least a few months behind those in the US. But they are still continuing to make progress, or that the geopolitical importance of AI will be decided only by whose LLM has ventured deeper into the technological frontier. The practical applications of AI, countries’ to capture foreign markets, and the application of AI into the real economy will matter just as much.

Here, China may hold an advantage. As with its dominance across many critical supply chains, Beijing may not need to produce the most advanced AI systems — only those that are affordable and widely deployable. In doing so, it could consolidate global influence by supplying functional, low-cost AI at scale.

Beijing seems to be pursuing exactly that path, developing an AI “open-source” strategy that offers affordable, widely available AI models for companies and individuals to use and modify as they wish. The production of the DeepSeek AI model, which matched the performance of Silicon Valley tools such as ChatGPT at a fraction of the cost for users, created goodwill among Chinese models with developers.

The four most popular models on OpenRouter, an AI hardware platform for developers, are now all Chinese. The goal for China is not only to win the frontier-model race, but to make its systems the default layer of AI adoption across industries and global markets. For most economies, the choice is increasingly between an affordable tool they can deploy now and a more robust one that may be out of reach.

And while the countries adopting Chinese models may be exposed to political pressure and cyber threats from Beijing, safer and more capable alternatives matter little if they are unaffordable. American AI companies are already under pressure to monetize products whose operating costs are rising. If Chinese open-source models become the cheap default for startups, universities, governments and businesses across the developing world, then America’s AI lead will be eroded from below.

Perhaps more concerning for America in the long run is how AI can give Chinese manufacturing even more strength, through the ongoing integration of AI as a general-purpose technology. China’s new Five-Year Plan mentioned AI more than 50 times and includes an “AI+” action plan aimed at spreading AI across the economy.

Beijing has been pioneering automation of its critical infrastructure for years, with promising recent results in increasing warplane production capacity. In that regard, China’s open-model strategy and manufacturing dominance will reinforce each other. Cheap, adaptable models accelerate deployment across the real economy while those deployments generate real-world data and use cases that can feed back into further model improvement.

The United States should not dismiss the importance of its lead in the AI race. That lead worries Beijing, not least because a more automated Chinese economy would also become more vulnerable to AI-generated cyber threats. But nor should Washington assume that China cannot catch up with American capabilities over time.

This AI competition represents part of a broader struggle over tech supply chains and geopolitical influence. Decisions over whether to adopt US or Chinese models could produce a more fragmented global reality, with different regions relying on different cloud providers, chips and security structures. The result will likely be a global economy which is divided into competing spheres, rather than one which produces a single winner.

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Miquel Vila is a political and geopolitical risk consultant focusing on industrial strategy, critical infrastructure and global supply chains.

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