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S o it looks like Rachel was right after all , then. She certainly made her share of mistakes and she was a hopeless communicator but when the IMF declares the UK’s performance on public debt and borrowing is “outstanding” then it is time to give Rachel Reeves more than a little credit for her relentless tax hikes. She’s gone a bit quiet lately, but maybe she will take some quiet satisfaction in her vindication.
Too late now, of course, as it is for Keir Starmer, but the hapless pair will no doubt also enjoy the spectacle of her successor, John Healey, not increasing defence spending to 3 per cent of British GDP when he delivers his first Budget on 28 October. Maybe Healey and Andy Burnham could find a way to acknowledge how her career-ending decisions did some good after all. Shoulders of giants and all that.
In the startling words of the International Monetary Fund’s chief economist, Silvana Tenreyro, to BBC News; “As you know, the UK has already started the consolidation process and it is the country that basically stands out, along with India.” Well, actually, a lot of us didn’t know, so thanks, Tenreyo. She just made Kemi Badenoch’s job at prime ministers questions tomorrow a lot more difficult. Best of all, of course, is the news that the UK is doing better than France , but we needn’t dwell on that.
Inflation will be higher next year, which we knew, and a UK economic growth forecast of 1.3 per cent, up 0.3 percentage points on the previous IMF outlook, is the kind of fissure that would once have been considered a disgrace. But in current circumstances, and underpinned by Rachel Reeves fiscal determination, the British economy is better placed than most. The world economy too is “resilient”, and very strong showings from India, China, and the emerging economies of Africa will propel it to expand by 3.1 per cent in 2027.
America under Trump is definitely down from Biden-era excellence at around 2 per cent, by the way. The IMF points out that it could still all go terribly wrong. In the impenetrable language of “centralbankese” they declare: “Without shoring up supply capacity and replenishing policy buffers, the global economy could soon test the limits of resilience...Inventories in energy markets are dwindling and additional geopolitical shocks could still transmit rapidly through prices and supply disruptions.” Translated that means, please President Trump stop your stupid war in Iran (preferably plus the one in Ukraine) and that will make things better and also help prevent the AI boom turning into a bust”.
They’re right, and just for a change maybe we should be optimistic about how such change could further change British political scene. For history shows that when wars end in the Middle East and the oil starts flowing freely it can create quite a glut, and global energy prices could easily collapse. Within months inflation would follow suit, and interest rates would resume the downward path they were on, and the sunny cheerfulness that was on display during Rachel Reeves last “fiscal event”, the Spring economic update, would also suddenly appear as the economic clouds break.
The cost of living crisis wouldn’t be over, but it would be greatly eased, as would the cost of servicing the UK’s outsized national debt. We’d have that “breathing space” the prime minister often refers to, and that elusive commodity “hope” would be more plentiful, boosting business and consumer confidence and Labour’s poll ratings too. All built on a firm “iron clad” British fiscal base.
Somewhere in her home in south London, or her constituency base in Leeds, Mr Healey’s predecessor will be able to say, if only to herself, “I did that”.
Source: The Independent
