IMF downgrade Reeves is gaslighting voters on energy crisis
Rachel Reeves is set to urge other countries to “follow her plan” for the energy crisis, but international analysts expect Britain to perform the worst among comparable nations thanks to decisions she has made, says Alys Denby
The war in Iran has come at the worst possible time for a government already struggling to command the confidence of both businesses and households on the economy. Two thirds of Brits believe we will enter a recession this year and 52 per cent are dissatisfied with Labour’s response to the energy crisis, according to polling for CityAM. But has anybody told Rachel Reeves?
In an astonishingly tone deaf intervention, the Chancellor is set to urge other countries to “follow my plan”, at the IMF in Washington. A press release issued ahead of her visit breathlessly relates that she will: “not repeat mistakes of the past with kneejerk decisions that are unaffordable and deepen economic pain”.
So confident is she in her ability to keep fuel costs down, she has decided to gaslight the British public on the world stage
So confident is she in her ability to keep fuel costs down, she has decided to gaslight the British public on the world stage. We have the highest industrial energy costs in the developed world. And in many other areas we are especially ill-equipped to face the current crisis as a direct result of her and her government’s policies.
The IMF, which she proposes to dazzle with her “blueprint” for the economy, has slapped the UK with the biggest growth downgrade of any G7 country. Per capita GDP growth is set to be 0.3 per cent this year compared to 1.6 per cent average for advanced economies. The good news is that inflation is set to return to target by the end of 2027, but only thanks to demand being suffocated by higher energy costs and a weak labour market.
Meanwhile, the government’s own military advisor has warned “”we are underprepared. We are underinsured. We are under attack. We are not safe”. Lord Robertson, who wrote the Strategic Defence Review, added: “We cannot defend Britain with an ever-expanding welfare budget.”
Reeves’ choices
Reeves is fond of the first-person pronoun, using a variation of the phrase “these are my choices” seven times in her last Budget speech. Comms specialists would say it projects authority and accountability. But in reality, she is cornered by both political and market forces. Gilt yields – which are now at their highest since the financial crash – will prevent her from borrowing her way through the crisis and her own backbenchers will block her from constraining public spending. In such a bind it’s difficult to see where she will find resources to give households the extra help she promises.
And her own Cabinet colleagues are making it worse. The self-harming moratorium on new drilling licences in the North Sea makes our energy supply less secure, renters’ rights are harming the housing market and workers’ rights are contributing to unemployment. These are the brainchildren of the likes of Ed Miliband and Angela Rayner, whose ideas are filling the policy vacuum inside Keir Starmer’s head.
Whatever Reeves says at high-profile international conferences and in set-piece speeches, she lacks authority at home, where her party is more interested in spending than growth. As for accountability, everyone in Britain is about to feel more economic pain than they have to – and that’s on her.
Alys Denby is opinion and features editor if CityAM