The Chancellor has left the nation completely unprepared for the unfolding disaster. The Tories pushed the tax take to its highest since the war, but Reeves has lifted it to wartime levels. We’re now handing over a bigger share of our national output than when Britain was fighting Nazi Germany and Imperial Japan combined. And still she can’t find money for the military, despite the rising threat from Russia, China and Iran. The economy is barely growing, inflation is rising, and now we’re heading for the biggest energy shock in history.
Today feels eerily like early 2020, at the start of pandemic. Back then, we watched, baffled, as Covid spread around the world. Stock markets shrugged. Then went into meltdown when it struck. Today, politicians and markets are in denial over the Iran war. Tehran has Donald Trump over a barrel, as it refuses to open the crucial Strait of Hormuz tanker supply route. It will now sit tight and wait for oil shortages to bite. It won’t be long. Trump is in meltdown at the prospect. Soon he won’t be the only one.
The lights are literally going out in South Korea as fuel reserves run low. Energy is being rationed across Asia and Africa. If Hormuz stays blocked, it’ll be our turn soon enough. And thanks to Reeves, we’re horribly exposed to the coming shock.
She’s not to blame for the Iran war. She’s even shown flashes of sense, urging more North Sea drilling. Not that Ed Miliband will listen. He wouldn’t recognise common sense if it attacked him with drones.
Reeves inherited a fragile economy that was just starting to recover. She killed that stone dead with her brainless tax and spend blitz, and still can’t balance the books. We’re on course to borrow a staggering £130billion this year. That’s nothing to do with Iran. And the cost of servicing that debt is now exploding.
Before the Iran crisis, 10-year gilt yields sat around 4.25%. Terrifyingly, they’ve just hit 5.15%. Every 1% rise in yields adds roughly £12billion a year to borrowing costs. The chancellor has just lost her fiscal head room. Again.
Soaring gilt yields buried Calamity Liz Truss. Under her, they peaked at just 4.42%. They’re far higher today, and still climbing. Yet Reeves claims to have restored stability. She won’t be saying that for much longer.
Inflation has just hit 3.3%. At some point, the Bank of England will hike interest rates. Banks are already increasing mortgage rates in anticipation. Two-year fixes have jumped from 5.37% to 5.85% in a month. More than 1.5million borrowers rolling off fixed-rate deals this year are about to be hammered. Energy bills will rise too, in a double whammy. And that’s on top of all those extra taxes.
Unemployment dipped in March to 4.9% but vacancies are falling fast. The squeeze on household finances is tightening across the board.
Reeves is the only Labour figure who even pretends to care about balancing the books. Backbenchers just want to spend, spend, spend. So do would-be successors to Keir Starmer, from Angela Rayner to Andy Burnham to, heaven help us, Ed Miliband.
But we can’t borrow a penny more without spooking bond markets further, and sending yields still higher. Reeves is trapped. We all are. More tax hikes will further crush growth, but Reeves will deliver them anyway. The avalanche is already rumbling. Unless Trump finds a quick way out of Iran, it’s going to sweep everything aside. Starting with the chancellor.
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