In some parallel universe, a British Chancellor of the Exchequer today delivered a barnstorming Spring Statement designed to fix the energy crisis before it became critical, bring talent back from the Gulf and restore a crashing labour market. She announced that she was removing the restrictions on new licences in the North Sea and lowering the windfall tax on exploration. She was setting up a royal commission to look again at fracking. She was launching a flat-tax deal to tempt entrepreneurs back from Dubai. And she is cutting employers’ National Insurance to ease the jobs crisis.
Unfortunately, in this universe we are stuck with Rachel Reeves. With her non-event Spring Statement, has she fluffed her last chance to save her job?
The Treasury promised that the Spring Statement was going to be boring – and at least it delivered on that pledge. For twenty painful minutes, Reeves rattled off her familiar lines about ‘stability’ and Liz Truss. But she had nothing new to say. Her speech appeared to have been written by Claude AI’s Chancellor bot a couple of weeks ago, and, despite the conflict that has flared up in the Middle East, she has seen no need to update it.
A more flexible Chancellor would have adjusted course
And yet, outside the House of Commons, the British economy is clearly heading into some major difficulties. The Office for Budget Responsibility downgraded its growth forecast to just 1.1 per cent this year, and that already seems optimistic. Natural gas prices are soaring, making the UK’s decision to rely so heavily on imported Gulf LNG to keep the lights switched on look even crazier than usual. Gilt yields have started to spike dramatically, postponing the next cut in interest rates and driving up the cost of government borrowing. Inflation is bound to follow in due course as well.
Sure, bond yields are rising everywhere in response to the escalating crisis in the Middle East, but that only makes matters worse. Everyone in the financial markets knows that if there is a general sell-off of government bonds, the UK will be right in the centre of the storm. We are one of the easiest targets for the hedge fund and short-sellers to attack. It could get very ugly for the Bank of England over the next few weeks.
A more flexible Chancellor would have adjusted course. Not Reeves. Instead, she stuck doggedly to the prepared script.
Only two outcomes now seem possible. Either the Prime Minister, Sir Keir Starmer, decides that Reeves is the latest ‘loyal ally’ to be sacrificed the next time he is forced to relaunch his premiership. Or else, if he is forced out of office, a new Labour PM brings in their own Chancellor. Either way, the Spring Statement was Reeves’s last chance to show some boldness and flexibility – and she blew it.
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