Rachel Reeves post Statement plan needs to create growth, not harm it

Tom Goddard, Assistant Manager, said:

The Government’s plan for the economy, which will be announced by Rachel Reeves in a speech later this month needs to be better thought out than last year’s Autumn Budget, where growth was stymied by sharp tax increases.

Growth is expected to increase throughout the remainder of the decade but is not at the levels it should be. The UK’s economic growth is expected to slow to 1.1%, down from the Autumn Budget estimate of 1.4%.

The Chancellor announced that developing AI and improving our trade relationship with the EU would form the basis of her upcoming announcement. But the issue the Government needs to focus on is the rising unemployment rate, especially among young people.

It is unsurprising that the Chancellor gave a light touch approach on joblessness at the Spring Statement, which is at a five-year high and predicted to get worse before it gets better. Young people not in education, employment, or training (NEETs) amount to around 1 million. The solution to sluggish growth may lie before the Government’s eyes, if it can give businesses the support they need to open up more entry level roles and take off some of the tax pressure its own policies have created.

The Spring Statement overall should be taken with a pinch of salt, as it was merely used to re-state the Office for Budget Responsibility’s (OBRs) findings, but in a narrative the current government wants to give, which gave greater emphasis on inflation and debt being down compared with previous years.

However, the Chancellor’s repeated use of the word ‘stability’ may have been completely upended by the global events of the last few days. The Spring Statement announcement and the figures within, while acknowledged, were given without consideration of the crisis in the Middle East. The conflict has caused a mass selling of Gilt-edged securities (GILTs), which are bonds issued by the Government. Interest rates, which were predicted to be cut throughout 2026, may no longer be.

It is not outside the realms of possibility that debt could actually increase as a result of the conflict in the Middle East. The fiscal headroom which the Chancellor informs us has increased from £21.7bn to £23.6bn may therefore not provide as much of a cushion as she would like.

Tom concluded:

Inflation figures, predicted to meet the Bank of England (BoE) 2% target by the end of the decade may also need recalculating as oil and energy prices are already surging.