Reeves tries to regain her footing as UK economic recovery plan teeters
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Risks at every turn for beleaguered chancellor aiming for budget sweet spot amid rising storms. Labour’s first budget was supposed to end 14 years of austerity without inducing the kind of shock associated with Liz Truss. Yet within months, Rachel Reeves’s mix of spending increases, higher taxes on business and extra borrowing for investment has begun to unravel.
![[The chancellor Rachel Reeves giving a speech.]](https://i.guim.co.uk/img/media/905b17ca78b5d3c4501918b83a08a3a7d702ae72/1257_0_2849_3561/master/2849.jpg?width=445&dpr=1&s=none&crop=none)
Not so much in response to the bond market jitters of last week, when panicky traders raised the cost of government borrowing to a level not seen since the financial crash a decade and a half ago – this reaction was sparked in part by a lack of confidence in Donald Trump’s economic plans and could prove short-lived. The unravelling relates more to domestic issues and how Reeves, when she delivers her next financial statement in March, will be forced to admit that the financial leeway she gave herself in October has gone.
The chancellor reluctantly gambled, as all chancellors must, that she could make progress without being blown off course by events. With a buffer of about £10bn on a budget of more than £1tn, staying on course was always unlikely. There was a risk that a rebound in inflation, however modest, would force the Bank of England to keep interest rates higher for longer. There would be little slack in the budget if that happened. Now it seems Reeves – without ripping up the self-imposed constraining rules that are the backbone of her strategy – will need to ask for more tax increases or higher borrowing to avoid reneging on public spending commitments.
