Rachel Reeves’s sticking-plaster solutions won’t fix the economy

With her spring statement, the chancellor came across as the penitent cowboy builder forced to explain how the foundations she had just fixed needed a bit more work, says John Rentoul

The hole in Rachel Reeves’s spring statement was that she all but admitted she had failed to “fix the foundations” – her big boast in the Budget just five months ago.

She had come to the Commons to announce policy changes because “the world has changed”. But the whole point of fixing the foundations was to strengthen the public finances so that they could withstand unexpected pressures.

The chancellor was coy, in any case, about the way in which the world had changed. She mentioned Vladimir Putin’s invasion of Ukraine, but that really got going three years ago. So she said vaguely that it had “since escalated further”, which is a strange way of saying that, in the past five months, Donald Trump has threatened to pull the plug on the Ukrainians.

Even that fails to make sense, though, because the government has already responded to that. Keir Starmer and Reeves decided last month to switch 0.3 per cent of national income from aid to defence spending. All Reeves did today was to set out how much extra defence spending there would be in the next year.

She was so sheepish about what had really changed that it was not until 20 minutes into her speech that she mentioned that the Office for Budget Responsibility (OBR) had halved its forecast of growth next year from 2 per cent to 1 per cent.

In other words, despite having taken decisive, once-in-a-parliament action to restore the public finances from the worst fiscal inheritance since the Second World War, she was already on course, after just five months, to break her self-imposed fiscal rules.

So here she was, like a penitent cowboy builder, to explain how the foundations that she had just fixed needed a bit more work.

She had three new ideas for fixing them again. One was to cut welfare spending, another supposedly definitive and lasting solution that turned out to be ineffective, needing a further bodge job at the last moment to cut even more from disability and incapacity benefits – because the OBR refused to accept Liz Kendall’s estimate of the savings from the changes she announced last week.

The second idea was some Treasury cleverness classifying some of the rise in defence spending as capital, thus releasing a few billion a year for day-to-day (current) spending. And the third idea was to make even deeper and less plausible cuts in unprotected departments in later years – that is, local government, transport, Home Office and justice.

By such devices, Reeves managed to get the OBR forecast back to where it was five months ago, meeting her fiscal rules in five years’ time with just £10bn to spare.

So she hadn’t fixed the foundations. Last year’s Budget looks more like one of those sticking-plaster solutions to which Starmer complained that the Conservatives were addicted.

All Reeves did today was to apply a new sticking-plaster solution to the one that didn’t last. She was strong in her statement in the Commons in taking the attack to the opposition, even if the repeated mantra of “promised by Labour, delivered by Labour and opposed by the parties opposite” was clunky. She savaged Mel Stride, the shadow chancellor, who “talked a lot, but didn’t propose a single alternative”.

But she is gambling again. In the seven months between now and the next Budget, she is hoping that the economy will – this time – do better than the OBR’s forecast. If it does worse – for example, if the Trump administration imposes tariffs on British exports to the United States – she will have to take further action. In October, it will be harder to cut public spending further, and the pressure to raise taxes again will become even harder to resist.

She has set her face against tax rises, but her party is becoming restive about “austerity” in public spending. And she has been weakened by her surprising decision to accept free hospitality at the Sabrina Carpenter concert at London’s O2. As significant as anything she said in her statement today were the comments by her fellow ministers, Heidi Alexander and Matthew Pennycook, who said they would not accept such freebies.

Reeves is like a gambler hoping for a lucky break. She keeps betting on black, and the roulette wheel keeps coming up red. Two times a year, the OBR will revise its forecast, and there must be a limit to the number of times that it can announce that Reeves is missing her fiscal rules.

It is no longer unthinkable that she could cease to be chancellor by the time of the next election.