James Kirkup

Never has Rachel Reeves been so glad to be so boring. The Chancellor will deliver today her spring update on the public finances at a time of unusual calm in the often overdramatic story of UK economic policy. One of the biggest actors in the story, the bond market, is currently happy and sleepy. In effect, the government’s plans assume a period of austerity just as the next election approaches After several years in which movements in government borrowing costs dominated the political conversation, calm has returned. Recent official data suggests that Reeves is under less fiscal pressure than she was in 2025. Tax receipts are up and the Treasury expects to borrow a bit less this year than last.  This is a welcome change.

The lexicon of Brexit has a new entry: the 'Farage clause'. As part of Labour’s 'reset' talks with Brussels, EU negotiators have reportedly floated a termination provision that would require compensation if a future UK government walked away from a new deal designed to ease post-Brexit checks on food and agricultural trade. In plain English: if Britain signs up to reduce border friction now and then later blows the arrangement up, Brussels wants someone to pay the bill for putting the border back together again. Like lots of things involving Britain and the EU, however, this 'Farage clause' is not what it looks like. It isn’t really about the Reform UK leader. It’s about puncturing Labour delusions about restoring British ties with Brussels.

Work is good. Work generates wealth, makes people happier and, maybe, delivers salvation. The Protestant work ethic is much disputed among sociologists and economic historians, but most people accept that some level of work is both necessary and desirable. This makes it all the more troubling that, buried in the OBR data under the Budget, are signposts to a future Britain where fewer people work at all – and where those who do are working less. The Office for Budget Responsibility says the labour force participation rate is forecast to fall ever so slightly, from 63.5 per cent in 2024 to 63.4 per cent in 2029. A tenth of a percentage point over five years is not huge.

It’s traditional to describe Budgets as a political gamble. Rachel Reeves is actually making two bets. First, that voters can be persuaded to see the big picture of the economy – and second, that Labour MPs can be persuaded to take the long view of this parliament. Both are long-odds flutters. On the macro numbers, Britain is… fine. Not flourishing, but not failing. GDP is still inching forward – up 1.3 per cent on the year to the third quarter of this year – better than France (0.9 per cent) or Germany (0.3 per cent). Services output is growing modestly; productivity is edging upward; and household debt is at its lowest level since at least 2007. Retail sales are up 0.4 per cent on the year. The FTSE has been having a fine old time.

As the Budget approaches, Westminster is full of chatter about Rachel Reeves’s decision to take the 'smorgasbord' approach to fiscal policy: lots of small, detailed measures, each raising only modest sums for the Treasury. Conventional wisdom says, correctly, that this is risky. Every little tweak is another opportunity for something to misfire. And when people in SW1 talk about small Budget measures going wrong, they often invoke the same cautionary tale: the pasty tax. That was the 2012 proposal by the coalition government to impose VAT on hot takeaway food, meaning the price of a Greggs sausage roll or a service station pasty would rise by 20 per cent. The resulting Pastygate saga became a symbol of how quickly a seemingly minor fiscal change can explode into political farce.

That Britain has the least generous state pension in the G7 should be recognised for what it is: good news. The fact that it won’t be celebrated tells us a lot about the mismatch between policy and politics around pensions in the UK. The nature of Britain's state pension isn’t an accident or a failure. It’s the product of deliberate design. For the past three decades, British policymakers have chosen to provide retirement income largely through private saving rather than tax-funded state benefits. They’ve done so quietly, but rationally. The alternative would be to copy France – a country that still treats the state pension as a social guarantee and which, as a result, is inching closer to fiscal crisis.

Labour MPs blaming Rachel Reeves over welfare cuts are like teenagers blaming their mum for telling them to wear a coat when there are bloody great storm clouds on the horizon. It's silly and it won't save them from getting soaked. But this is emerging as part of the blame game over Labour’s welfare debacle, where the party's MPs forced the government to shred its own welfare bill by threatening to vote it down at second reading. 'She must be toast,' a Labour MP told the FT. The Times quotes a senior Labour source accusing Reeves of having 'very little political acumen'. The argument, apparently, is that Reeves is at fault for trying to find £5 billion of savings on a welfare bill that is currently on course to reach £373 billion by the end of the decade – or 10.8 per cent of GDP.

A Labour government facing a rebellion over welfare reform is something of a dog-bites-man story – Labour never finds this issue easy. But the nature of the current rebellion tells us something novel and revealing, not about the policy, but about the modern Member of Parliament. Yes, principle and policy matter here, but what’s really driving dissent on Labour’s backbenches is not ideology, but geography. Or more precisely, constituency geography. Many of the Labour MPs likely to defy the leadership on welfare cuts are not old lags or even rebels by temperament. Many are new to Westminster, elected in the 2024 landslide that gave Labour power. And their rebellion is not really born of Corbynite nostalgia or factional muscle-flexing.

Rachel Reeves’ Spending Review does more than set budgets. It exposes a contradiction at the heart of Labour’s approach to government: a party that wants to rebuild the state won’t take the hard decisions needed to make that possible. The review was more painful that it needed to be for Labour, because Labour MPs have shied away from serious welfare reform. Two mistaken ideas dominate much of the progressive conversation about the public finances. The first is that the state can go on doing more and spending more forever, with no real constraint. The second is that all talk of welfare reform is right-wing cruelty. Unless and until Labour challenges both ideas head-on, hopes of 'national renewal' will be forlorn. A pound spent on welfare cannot be spent on services.