The hope-sapping timidity of Rachel Reeves

The chancellor has fallen for the fallacy of the ‘household budget’ – and we will all pay the price

Photo: UK parliament / flickr.com

Data published last week showed that the UK economy scarcely grew between July and September. In that three-month period, GDP increased by just 0.1% (in September, the economy actually contracted). The growth rate for the quarter was weaker than expected – and lower than the 0.5% increase posted in the April to June period (which represented the final quarter under the soon-to-be-evicted Tory government).

Though it is still early days in the life of this government, the figures will have come as a deep disappointment to Keir Starmer and Rachel Reeves – particularly given that, in opposition and throughout the general election campaign, Labour had identified economic growth as a key priority.

Some critics have suggested that the pre-budget pessimism spread by the chancellor contributed to the slowdown. I suspect there is some truth in that. After all, if the government itself appears cynical about the state of the economy, it’s hardly surprising that individuals, businesses and investors will see things in the same way and act accordingly.

In spite of the general cheerlessness, however, the budget, when it eventually came, was described by Reeves as a ‘budget for growth’. I think this appellation was horribly misplaced. Sure, there was some extra money for schools and hospitals, and a few other scraps here and there. But it offered nothing of the radicalism needed to seriously kickstart the economy.

On the contrary, it seems to me that, unless Reeves and Starmer rethink their economic strategy quickly, their election promise to boost growth will be in danger of turning to dust. Worse, Reeves’s plans have the potential to lead the economy into recession – an outcome that would be calamitous for the fortunes of the government but, more importantly, for the country.