Things can only get worse for Chancellor Rachel Reeves from here. And for the rest of us, unfortunately.
The economic outlook is abysmal as she prepares her Spring Statement next Wednesday.
I hate to be gloomy and wish I could offer some comfort, but it’s not easy right now.
To be fair to Reeves, the Tories left Labour a god-awful mess. They ducked every tough decision for years. But at least Rishi Sunak and Jeremy Hunt put us back onto the path to growth, with the economy rising 1.2% in the first half of last year.
Reeves stamped that out immediately. After 14 years on the sidelines, Labour forgot their job in government is to lead, not whinge.
By ranting on about that £22billion black hole (PM Keir Starmer still can’t shut up about it) and threatening brutal tax hikes, Reeves destroyed confidence.
Then she finished the job by hitting us with £40billion of tax rises in her horror Budget while borrowing another £30billion.
This morning, Reeves was punished by two more pieces of dismal news.
First, the official growth forecast for 2025 is set to be halved next week.
The Office for Budget Responsibility (OBR) says GDP will rise just 1% in the year to March 2026. It said 2% before.
That figure should be much, much higher, as Reeves splurges public money, and the population rockets due to uncontrolled immigration.
This morning, we also learned government borrowing was higher than expected in February, at £10.7billion. That’s the fourth-highest February figure on record.
Reeves has no choice but to announce spending cuts next week to meet her self-imposed economic rules, which she claims are “non-negotiable”.
This follows last week’s bombshell that the UK economy unexpectedly shrank in January, by 0.1%.
Reeves was quick to blame Donald Trump for that, but it was just another lazy excuse.
Yes, Trump is causing economic havoc, slapping trade tariffs on anything that takes his fancy. But the impact won’t be felt until the March figures are published in May.
She needs the economy to grow, but Trump could sink it further.
Inflation isn’t helping. The Bank of England (BoE) now reckons it will hit 3.75% this year, up from 3% in January. It could be higher.
As a result, the BoE didn’t dare cut interest rates yesterday, in yet more bad news for borrowers. We may only get one more cut this year.
Awful April is almost upon us, too, with everything from our energy costs to council tax bills set to rise faster than inflation.
Employer’s National Insurance hikes, dreamed up by Reeves in her Budget, also come into force from April. These will further slow growth and destroy jobs.
This morning, JD Wetherspoon said it will add £1,500 to the cost of running just one pub. Imagine that spread across every business in the country.
Especially at a time when anxious consumers are scared to spend.
Reeves has indicated she won’t hike taxes in Wednesday’s Spring Statement. She only wants to do one “fiscal event” a year.
The next will be her Budget in the autumn. And it’s going to be brutal.
This week’s row over Labour’s move to cut £5billion of our rocketing sickness benefits bill show that Labour MPs can’t stomach any more cuts.
If Reeves wants to balance the books, her only weapon will be yet more tax hikes.
We’ve already seen the damage her first raid did to confidence and growth. In October, she’ll have to double down.
Brace yourselves. The worst is still to come.
