Reeves says ‘everything is fine’ as economy burns
Having stripped the ‘fiscal’ element from the fiscal event, we were left with simply an event. But was it even that? It could have been called an occasion, but even that might have been stretching it. What we actually got was a Spring Statement that amounted to little more than a Labour party conference speech.
We weren’t expecting fireworks, but was it too much to hope that the Chancellor might meet the gravity of the moment?
For context, war has erupted in the Middle East; UK unemployment is set to soar past pandemic-era highs; markets are nervous; bond traders are spooked; and this year’s GDP growth has been slashed from 1.4 per cent to a pitiful 1.1 per cent. In response to all this, Rachel Reeves stood up and said “my plan is working.”
She may as well have sat back down again after those four words, as what little substance she went on to offer was rendered questionable at best (obsolete, at worst) by the drama unfolding in Iran.
Moments before Rachel Reeves got to her feet in the Commons yesterday, one City analyst emailed clients saying the Spring Statement was “totally irrelevant” in light of the gas price surge and associated economic shocks looming on the horizon. That may be true, but Reeves was as least forced to acknowledge the latest forecasts from the Office of Budget Responsibility.
These were being finalised just as the first US and Israeli bombs were being launched over the weekend, meaning they were quite possibly out of date by Sunday morning. At the end of last week, inflation was expected to continue its downward trajectory. As of today, economists aren’t quite so sure.
What planet is Reeves on?
As for the bigger picture, it’s worth remembering that stimulating and supporting economic growth was this government’s number one priority. Now, 20 months into office, nearly two years after coming to power on a distinctly pro-growth ticket, the OBR expects growth of just a smidge over one per cent this year. It takes an extraordinary amount of arrogance to declare “our plan is working” even as official forecasts show the opposite.
Little wonder the shadow chancellor, Mel Stride, asked “what planet is the honourable lady on?” We needed a change of plan, an acknowledgment that the plan has not worked. Taxes are too high and regulations are too onerous. The welfare bill is out of control, set to hit £407bn a year by the end of this parliament. Growth is being strangled.
The Chancellor’s shameful performance yesterday suggests she either hasn’t noticed, or doesn’t care.