Chancellor Rachel Reeves declared to the House of Commons on Tuesday that the government has restored economic stability, but her remarks came as Foreign Secretary Yvette Cooper briefed MPs on plans to evacuate British nationals from escalating violence in the Middle East.
The ongoing conflict has driven energy prices higher, and if it persists, the Office for Budget Responsibility's (OBR) forecasts could quickly become outdated. Oil prices continued to climb during Reeves's speech, and financial markets have raised government borrowing costs, betting that central banks will be unable to cut interest rates much further amid rising inflation.
Reeves had hoped to claim credit for improved public finances, citing lower gilt yields since the budget. However, these gains may be eroded if recent market turmoil continues. She acknowledged the need to chart a course through uncertainty, but former Chancellor Jeremy Hunt warned that her promises to reduce utility bills could ring hollow if energy costs rise.
The OBR's forecasts also highlight potential pitfalls beyond the conflict. Weaker-than-expected net migration has led to modestly downgraded growth forecasts, and Labour's new tough migration policies could further slow growth. Additionally, unemployment is expected to rise to levels seen during the Covid pandemic, a trend the public is acutely aware of, according to polling.
If the conflict abates quickly, Reeves's claim of stability may hold, but prolonged violence risks overtaking her determined calm. The chancellor's pledge to protect families from global turbulence faces a stern test as events unfold.
