Analysis: Rachel Reeves Was In Punchy Form – But War In The Middle East Could Ruin Her Economic Plans

Rachel Reeves looked as though she was enjoying herself as she took aim at Labour’s political opponents while delivering her Spring Statement.

With no new policies to announce, the chancellor decided to use a decent chunk of her time at the despatch box attacking Reform UK, the Conservatives and the Green Party.

“The Tories left our country, our people and our allies exposed: They had no plan and no intention to fund their pledge to spend 2.5% of GDP on defence,” she said.

“Reform would go one step further by ditching our allies and siding with Russia, while the Green Party wants to take us out of Nato and jeopardise our alliances.

“So let me be clear: It is Labour and only Labour that can provide social justice, national security and fiscal responsibility.”

In another section, she dismissed Reform as “a Tory tribute act” following the defections of the likes of Robert Jenrick and Suella Braverman.

“They may have changed the colour of their rosettes, but the British people won’t forget that they are the exact same people that wrecked our public services and wrecked our public finances in the last Tory government,” she said.

“The same people, the same policies and the same disastrous outcomes for working people.”

But behind the political knockabout, the chancellor must know that the fate of the UK economy – and perhaps even the Labour government – depends on the outcome of the latest war in the Middle East.

The Office for Budget Responsibility (OBR) may have forecast that inflation will come down, but that was before the US and Israel’s bombing of Iran sparked an energy crisis which has seen gas prices soar in the past 48 hours.

If that ends up feeding through into people’s bills, Labour will pay a huge political price.

The same goes for the OBR’s forecasts on economic growth, as well as government borrowing and national debt.

A prolonged conflict in the Middle East, and the accompanying economic turmoil which would ensue, would blow another huge hole in the already-stretched public finances.

With unemployment set to be higher than expected this year and the tax burden set to hit another post-war high, yet more economic uncertainty is the last thing the chancellor needs.

“This government has the right economic plan for our country,” Reeves insisted.

“A plan that is even more important in a world that in the last few days has become yet more uncertain.

“With the unfolding conflict in Iran and the Middle East, it is incumbent on me and on this government to chart a course through that uncertainty, to secure our economy against shocks and protect families from the turbulence that we see beyond our borders.”

She may have talked a good game, but the chancellor knows that events thousands of miles away have the potential to destroy her economic plans and plunge the government into political crisis they may not recover from.