Chancellor Rachel Reeves has insisted the government has the “right economic plan” as she delivered a spring statement overshadowed by surging energy prices and rising borrowing costs linked to the conflict in the Middle East. Addressing MPs, Reeves promised “economic security in an uncertain world” against a backdrop of crude oil prices rising 7.2% in a day and gas prices climbing 23%, prompting warnings of higher household and business costs.
Reeves said she was in close contact with Bank of England Governor Andrew Bailey and would meet North Sea energy industry representatives on Wednesday. The Office for Budget Responsibility (OBR) forecast, drawn up before the US and Israeli assault on Iran, showed GDP growth downgraded to 1.1% this year from a previous 1.4%, though growth is expected to pick up to 1.6% in 2027 and 2028. The OBR also forecast unemployment rising to 5.3% this year, up from an earlier estimate of 4.9%.
Underlining fragility, the OBR warned the expanding Middle East conflict “could have very significant impacts on the global and UK economies”. Analysts noted the forecasts depend on energy prices returning to normal. Ruth Curtice of the Resolution Foundation warned that if oil and gas price increases are sustained, inflation could hit 3% by summer and typical energy bills rise by £500. Andrew Wishart of Berenberg said a prolonged conflict would cause a “fresh stagflationary shock”.
Reeves emphasised that her fiscal headroom had increased to £23.6bn from £21.7bn in November, though government borrowing costs have risen again in recent days. She acknowledged the OBR had revised near-term growth partly due to weaker net migration, but had not yet factored in the home secretary’s tough new refugee policies. Shadow Chancellor Mel Stride accused Reeves of “utter complacency”, comparing her to a dodgy estate agent.
