Issue seven | Unpacking the Spring Statement 

Chancellor Rachel Reeves promised that her Spring Statement would low key and simply an update on the state of the economy with no new tax or measures for reasons of policy stability. The Government believes, despite recent U-turns, it still offers business the confidence of stability and certainty. As such there were no surprise rabbits out of the hat which have become the custom in Westminster on these occasions. Against the backdrop of global economic fragility, surging oil prices and rattled markets the Chancellor sought to highlight positive economic data, which she argues proves that on her watch the economy is turning a corner. She was able to boast of the Government’s record of:

 

• Faster growth than any other European country in the G7
• GDP per head growing faster than was expected in the Budget – with growth of 5.6% over the Parliament
• Borrowing reduced by nearly £18 billion compared to the Autumn
• Borrowing this year the lowest in six years and falling below the G7 average

 

Such claims are as much political as economic. Concluding with a flourish about “social justice, national security and fiscal responsibility”, Reeves signalled the themes on which Labour hopes to regain the initiative. Her barbs at Reform and the Greens were a reminder of how fragmented Britain’s political landscape has become. The Conservatives, for their part, dismissed the statement as a “surrender”. They point to downgraded growth forecasts, debt hovering around 95% of GDP, and rising unemployment.

 

In truth, living standards will decide the argument. After more than a decade of anaemic expansion, the Government knows that its fate rests on whether growth becomes tangible in voters’ pockets. She reminded MPs of increased infrastructure investment, newly minted trade deals and technical reforms to Treasury “Green Book” rules intended to spread capital spending more evenly across urban, rural and coastal Britain. In the coming weeks she will deliver the annual Mais Lecture, where she is expected to flesh out the next stage of her growth plan.

 

As always, it’s worth delving into the detail buried in the documents published by the Office for Budget Responsibility. The Government currently meets its fiscal rules by pencilling in spending cuts of tax rises in 2028 and 2029. Is that politically realistic given the possibility of a General Election in those years? As Sir Humphrey might say, that’s a brave decision and expect those projections to be revised in future Budgets – that is my prediction.

 

Yet the larger question marks lie beyond Britain’s shores. For all the optimism on the Labour benches in the Commons chamber, there was little acknowledgement of how swiftly global conditions might shift. The Chancellor insisted she has the right plan for this time of economic uncertainty. Though the Office for Budget Responsibility warned that the Middle East conflict could deal the economy a “very significant” blow. Higher oil and gas prices alone, it suggested, could add a full percentage point to inflation.

 

Ministers had hoped that falling price pressures would soon return Britain to the Bank of England’s 2% target. That path now looks less certain.

 

How the days and weeks ahead unfold will have a greater impact on the UK economy and the Government’s political fortunes than anything announced by the Chancellor today.

 

Former Labour MP for Leicester South, Jonathan was a long-standing senior member of Keir Starmer’s shadow cabinet and played a central role in the Party’s 2024 general election campaign. 

 

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