It has become customary for Budgets to unravel within 48 hours of being delivered. Rachel Reeves didn’t have much in the way of fiscal announcements to deliver on Wednesday, but even what she did have to say seems to be falling apart. It has since transpired that the Office for Budgetary Responsibility (OBR) did not take into account any risks from a transatlantic trade war when downgrading its growth forecast for 2025 from 2 per cent to 1 per cent. This is an additional risk which is almost certain to erode her newly-clear fiscal headroom and lead to more tax rises in the autumn Budget.
If Reeves was hoping for support from the Resolution Foundation, until recent a reliably Labour-supporting think tank whose former director, Torsten Bell, is now serving as one of Reeves’ junior ministers at the Treasury, she has been cruelly let down. Its research director, James Smith, has not just written off Reeves’s chances of turning around the economy this year, but pretty much for the rest of this Parliament.
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