The False Economies of Rachel Reeves’ Spring Statement

“There is nothing Labour about working people being made to pay the price for economic irresponsibility,” Rachel Reeves told MPs on Wednesday as she set out her economic Spring Statement.

Yet despite her claims to the contrary, the reality is that many working people are already being made to pay the price by this Government.

Those forced to take the biggest hit so far are the poor and disabled.

According to the Government’s own figures, the Chancellor’s planned cuts to disability benefits will hit one-in-five families with a disabled member, leaving them thousands of pounds a year worse off.

This will lead to real hardship for hundreds of thousands of people.

According to the Department of Work and Pensions’ own impact assessment, published earlier today, an estimated 250,000 people, including 50,000 children, will now be pushed into poverty as a direct result of the Chancellor’s planned cuts to disability and carers allowances.

As the charity Save the Children warned today, unless ministers change course, “this will be the first Labour Government ever to preside over a significant rise in child poverty.”

Reeves claims she has no choice but to impose these cuts, due to the dire economic inheritance left by the Conservatives.

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However, while the poor and disabled, in both the UK and around the world, are being asked to pick up the tab for this inheritance, others are notably being spared.

Despite rising demands among Labour MPs for new wealth taxes, Reeves today ruled out any new increases on either the wealthy or corporations. 

And when pushed by the Liberal Democrat leader Ed Davey at Prime Minister’s Questions, to rule out his reported plans to actually slash taxes on tech corporations, in order to appease Elon Musk and the White House, Keir Starmer pointedly failed to do so.

Reeves today justified her cuts by insisting that the Government had to be “responsible” with its budgets, unlike the preveious Conservative government.

Yet while there is a need to reduce the ballooning level of welfare payments post-Covid, the Government’s plans to simply slash payments now are likely to simply shunt the burden of these increased costs elsewhere.

As charities and local government experts have already warned, the steep cuts to support for disabled people will place massive extra pressure on already overstretched local authority budgets.

The increase in child and adult poverty rates will also inevitably increase the burden on the NHS and other public services in both the short and long term. The Government’s huge cuts to international aid will also simply store up bigger problems for the future, as efforts to tackle rising global instability and refugee flows are affected.

Reeves’ spokespeople today insisted that it simply isn’t possible for the UK to “tax and spend” our way to growth. They also boasted that the Government’s planning reforms are expected to add significantly to the size of the economy over the coming years, without additional taxpayer expenditure.

With the single exception of the military, which is in line for significant increases to its budgets, Reeves’ budget was a rejection of exactly the sort of Attlee-style Keynesian economics both she and Starmer had promised in the years running up to entering government.

A Trump Time Bomb

Despite all this, the OBR did forecast that the UK economy will start to grow again, after initially halving over the next year. However, these forecasts, which are notoriously unreliable at the best of times, are likely to be even more short-lived than usual.

The main reason for this is Donald Trump’s planned global trade tariffs, which are due to kick in next week. Once imposed, they risk triggering a broader global economic downturn, which in turn risks making most of today’s statement irrelevant.

In a particularly grim assessment published by the OBR, the organisation estimates that Trump’s planned trade wars could wipe out up to three quarters of expected economic growth in the UK over the coming years.

If and when that does happen, Starmer’s Government will face a far bigger set of “difficult choices” than anything announced by his Chancellor on Wednesday.

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Faced with that scenario Reeves and her boss will have to decide whether to stick to her “non negotiable” fiscal rules and impose real austerity on the most vulnerable people in the country, while protecting the wealthiest from increased taxes, or to take an entirely different course.

There is still time for them to do so. The deteriorating global economic situation means that the pressure for fair tax rises will only grow as we head towards the Autumn budget. This week’s cuts to welfare and the coming cuts to individual departments will also make the argument for spreading the load to those who can most afford it far easier for a Labour Chancellor to make.

As the Chief Executive of the anti-poverty think tank the Joseph Rowntree Foundation put it in a statement today: “With living standards for the poorest under continuing assault, the Government needs to protect people from harm with the same zeal as it attempts to build its reputation for fiscal competence.”   

Starmer’s Government may ultimately come to that same conclusion and start placing the largest burdens on those who can afford it most, rather than those who can afford it least.

However, if they do have such plans, there was very little sign of it in today’s statement.