Rachel Reeves insisted Labour’s plan is on track today despite the Middle East threatening to wreak havoc with the economy.
The Chancellor is unveiling her Spring Statement in the Commons, with mounting questions over the performance of UK plc.
She argued that the government has the ‘right plan for the country’, claiming that falling inflation and interest rates are putting money in people’s pockets.
But the set-piece comes amid mounting alarm at the developing war in the Middle East, which is already sending oil and gas prices spiralling. Concerns were raised today that the energy price cap could see a huge jump in July, while there are already signs of panic buying at the pumps.
Even before the latest turbulence official figures were showing Brits actually getting poorer – with GDP per head falling for six months at the end of last year.
With the government making clear there will be no big moves on tax or spending this afternoon, all eyes will be on the forecasts from the independent Office for Budget Responsibility.
Chancellor Rachel Reeves is unveiling her Spring Statement in the Commons, with mounting questions over the performance of UK plc
The Treasury watchdog is almost certain to follow the Bank of England in downgrading growth, with global instability and the impact of Labour’s massive tax raids weighing heavily on activity.
At the start of February, the Bank trimmed its estimate for expansion in 2026 to 0.9% from 1.2 per cent, and to 1.5 per cent from 1.6 per cent for 2027.
The OBR could also cause Ms Reeves major headaches by lowering predictions for tax revenues, and pencilling in higher unemployment levels.
Falling immigration – regarded as good news politically for Labour – could ironically put more strain on the public finances.
The independent body will also put price tags on some of the embarrassing U-turns executed by Sir Keir, including on the farms tax and business rates increases.
Although the OBR will not make a formal assessment of whether Ms Reeves is on track to meet her fiscal targets, analysts will be able to extrapolate how the figures stand.
That could give an indication of whether Brits face more tax rises come the Autumn – in spite of hints coming out of the Treasury that Ms Reeves is looking for ways to ease the burden come the election.
However, the Iran crisis could blow another huge hole in the government’s plans.
Former chancellor Jeremy Hunt said the Treasury’s rule of thumb was that a 20 per cent increase in global oil and gas prices would mean a 1 percentage point rise in UK inflation, and 0.5 percentage points off economic growth.
The Government has promised to restrict itself to one ‘fiscal event’ a year for tax and spending policies – the Budget in the Autumn.
The Chancellor will tell MPs this afternoon: ‘This Government has the right economic plan for our country… in a world that has become yet more uncertain.
‘Stability in the public finances, investment in infrastructure and reform to our economy.
‘Building growth not on the contribution of a few people or a few parts of the country, but in every part of Britain with a state that doesn’t stand back, but steps up.’
Ms Reeves will later add: ‘Because of the decisions we have already taken, we have a stronger and more secure economy. Inflation and interest rates falling. And in every part of Britain, working people are better off.’
Chancellor Rachel Reeves is unveiling her Spring Statement with mounting questions over the performance of the economy
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The OBR is seen as almost certain to follow the Bank of England in downgrading growth. Pictured, the watchdog’s forecasts from November
The price per therm of natural gas touched 170p today – compared to the 78p the OBR expected it to average over the coming years
The OBR forecasts for oil and gas prices (pictured, the November outlook) could be smashed if the tumoil continues in the Middle East
Despite Ms Reeves’ positive tone, polling for the More in Common think-tank suggested voters remain gloomy about their own economic prospects.
The study found that 58 per cent of voters fear the cost of living crisis may never end, while a further 23 per cent do not think it will end this year.
The poll also found that Labour is losing the support of voters most concerned about the costs of living.
Overall, the party is holding on to 54 per cent of those who backed Labour in 2024. But the figure falls to just 38 per cent who fear the Chancellor will never get to grips with rising prices.
