Chancellor Rachel Reeves has crashed the economy, but could crawl from the wreckage (Image: Getty)
Whoever put Rachel Reeves behind the wheel needs their head examining. Actually, we know who did. Sir Keir Starmer. He swallowed her claims that she knew how to run a modern economy, and we’re all paying the price. After a string of growth-crushing tax hikes and humiliating U-turns, confidence has collapsed. Last November’s Budget was the killer blow, creating chaos and uncertainty.
On Thursday, we learned the economy grew a feeble 0.1% between October and December. Incredibly, Reeves hailed it as proof she’s “building a stronger and more secure economy”. Starmer chimed in, claiming it meant “more money in your back pocket”. It doesn’t. Real GDP per head actually fell 0.1% in both of the last two quarters. So individually, we have less money in our pockets. And even less once inflation is taken into account. More lies.
Reeves also appears to have burned through her fiscal headroom yet again. That raises the grim prospect of another round of tax hikes in the autumn, making everybody feel even poorer and angrier.
The Chancellor refuses to take responsibility for this smouldering ruin. But here’s the extraordinary thing. She may somehow crawl out of the wreckage.
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Last week was grim for both Reeves and Starmer, whose political fates are closely entwined. The Prime Minister is hanging on by the skin of his teeth. But when Labour MPs look at the alternatives, whether Angela Rayner, Ed Miliband, Wes Streeting or Andy Burnham, it realises there’s no obvious saviour. They could be even worse. Much worse.
The party’s left has taken over in what is effectively a coup, with Starmer their helpless puppet. Why cut his strings now, when he can be of use? That could give Reeves a lifeline too, despite all the chaos she’s inflicted. And she may just be about to benefit from an extraordinary stroke of luck.
A key reason why everybody is so angry these days is that inflation has rocketed out of control. It remains high, climbing to 3.4% in December, but it’s falling sharply in the US in Europe. And despite Reeves’s constant bungling, we could follow. Some analysts reckon inflation could slide to the Bank of England’s 2% target by the spring. If they’re right, and it finally stops raining, today’s low mood could quickly lift.
The Bank of England could even cut base rates from today’s 3.75% towards 3% this year. Lower borrowing costs would ease pressure on households and businesses, nudging activity higher. Reeves will take full credit, of course. Politicians always do. Some might even believe her.
There’s more. Donald Trump is expected to fire up the US economy, pushing for rate cuts and massive stimulus ahead of autumn mid-term US elections. If America accelerates, the UK could be swept along in its slipstream.
None of this would be down to Reeves. In every respect, she’s made it harder for the UK to benefit. But the global economy is cyclical. Tides turn. And she may just find herself carried by one. It would be a ridiculous outcome, if it happened.
Starmer’s new “cost of living tour” looks neatly timed. He’ll shine a spotlight on rising prices just as they start to ease, then claim the credit. It might just prove the first smart political thing Starmer has done in power.
If inflation falls and growth revives, Reeves and Starmer will present themselves as the mechanics who fixed it. It’s a big ‘if’, of course. With those two in charge, the wheels could come off at any time.
But if events fall their way, there’s a chance they may cling onto power, all the way to 2029. Reeves and Starmer don’t deserve that – and the rest of us certainly do not.
