Rachel Reeves, the Shadow Chancellor of the Exchequer, has pledged to “defy” the pessimistic economic forecasts for the United Kingdom. Reeves is now facing a perfect storm of challenges in public finances. She is pre-emptively fighting back against what she describes as doom-mongering forecasts of our nation’s economic prospects, ahead of a feared OBR downgrade.
The UK government, under Reeves’ leadership, is currently contending with a bigger-than-expected fiscal hole. She set out her last Budget in the autumn, announcing over £40 billion in tax increases. This package featured a big increase in National Insurance Contributions for employers. Reeves has signaled that she “is not returning” for additional tax increases.
Reeves acknowledges that “our country and our economy continue to face challenges.” Not an easy task, but she doesn’t shy away from these challenges. Her fiscal rules aim to maintain credibility with the international financial markets that lend money to the UK. But the OBR will be revising down its productivity forecasts – currently by around 0.3 percentage points. Such a downgrade would open up a £20 billion hole in keeping to her tax and spend pledges.
Given these possible future disappointments, Beverly Reeves has chosen to go on the offensive against future bad predictions. She is not going to receive them and not do anything about it, she is going to push back and beat them. “Austerity, a chaotic Brexit and the pandemic have left deep scars on the British economy that are still being felt today,” she stated, attributing some of the current economic difficulties to the legacy of the previous Conservative government.
Reeves has raised alarm on the negative mood of the public when it comes to perceptions of the economy. She stated, “I don’t need a spreadsheet to tell me that too many working people in Britain feel the economy is unfair and does not work for them, with the cost of living still bearing down on family budgets.” This recognition of public frustrations and her determination to combat hype and mend economic wounds are focused on accomplishing her larger goal of fostering equity in the system.
Despite criticism that her tax increases may have deterred business investment and job creation, Reeves remains focused on building a resilient economic strategy. She’s not shied away from admitting the appalling productivity record she’s inherited from her Conservative predecessors. She said, “Those determinations by the OBR will be brought at the budget next month, and I’m not going to pre-empt them.” So I’ll be frank here as to where we are at. The productivity performance we inherited from the last Conservative government, and the continuing legacy of the financial crisis, has been woefully weak.