Yesterday’s Spring Statement was a very bullish display by Rachel Reeves. With the bulk of it having been written before Trump’s strikes on Iran, it was full of a different kind of attack – political broadsides on Reform and the Greens.
But events thousands of miles away in the Middle East cast a shadow over her performance and the very predictions and forecasts she was using to shore up the Government’s position.
With an eye to the future, Reeves made clear that any political instability or change will put at risk what she considers to be the success of this Government.
In this she showcased the OBR data showing:
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Unemployment peaking at the end of this year, then falling every year in the rest of the Parliament – to a level lower than under the Conservatives
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Debt falling in every year, with increased headroom from the stability rule compared to the Autumn Budget
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Inflation falling quicker than the Autumn Budget
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Growth falling back this year due to lower net-migration, then increasing in coming years
In her brief direct remarks on Iran, Reeves showcased the defence investments made by Labour. She showcased the decision in January to invest £650m in the RAF Typhoon fleet & the fresh £1bn investment in UK-built medium lift helicopters. But, opponents were quick to highlight the failure to raise defence spending quicker than previously planned.
Domestically, Reeves also relayed many of the socially progressive elements of the Government’s programme to date. There was a particular focus on the decision to get rid of the 2-child limit. Given the polling of the Greens this is a wise tactical choice to shore up the left.
Reeves attracted criticism for her failure to address student loans. This has become a mounting issue politically. More Labour MPs are calling for action, and we should expect to see some progress in coming months. Without it, Labour risks being outflanked on the very type of issue many feel they should be owning.
With an attempt to look ahead, Reeves showcased her Mais Lecture in a few weeks’ time. She signalled further action on our relationship with Europe, and on “harnessing the power of AI”.
But, as is often said, a week is a long time in politics.
What the world looks like by the time of her lecture is unknowable.
The markets are responding minute by minute to Trump’s war on Iran.
By the time she stands up in the City, all of yesterday’s predictions may have fallen by the wayside.
A protracted conflict will hammer the cost of living and make the dire political situation immensely harder. A difficult period ahead awaits.
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