Rachel Reeves accused of being ‘tone deaf’ on energy prices as Middle East crisis deepens
Rachel Reeves was accused of being “tone deaf” on energy prices when she delivered her spring statement in the House of Commons on Tuesday. The Chancellor sought to reassure the House of Representatives about the potential impact of Donald Trump’s war with Iran on oil and gas prices and how it could affect Britain. But he insisted Labour’s economic plan was “right”.
The Chancellor defended fiscal policy, saying the government was in a “better place” to deal with shocks to gas and oil prices than it was after the last general election, amid rising tensions in the Middle East.
But Labor and opposition MPs challenged him on the need to have a plan to cap energy bills if the fight escalates further.
The Office for Budget Responsibility (OBR) report comes as it paints a bleak picture, warning that economic growth forecasts are bearish, unemployment will rise further and net migration will increase.
Ms Reeves sought to put a positive spin on the figures, claiming they showed the government “has the right economic plan for our country in a world that is becoming more uncertain”.
Reform took aim at Britain and the Green Party, warning critics in his own party warning against any “tactical change”.
Following a highly politicized spring statement, the OBR also said:
- Debt expected to fall to 4.3 percent of GDP but still well above the 2 percent target
- Real GDP growth is expected to slow from 1.4 percent in 2025 to 1.1 percent in 2026
- Unemployment rate will increase from 4.75 percent in 2025 to 5.33 percent in 2026
- Wage growth is expected to slow to around 3.5 percent in 2026 and then fall to an annual average of 2.25 percent
- The better news is that the headline inflation rate will fall from 3.4 percent in 2025 to 2.3 percent in 2026.
Although the figures were based on mid-January estimates, well before the US and Israel attacked Iran at the weekend, Ms Reeves sought to address the growing crisis as MPs called for measures to limit fuel bills and energy costs.
The UK’s benchmark gas price rose 54 percent on Monday and the global benchmark oil price, Brent crude, rose nearly 9 percent as a result of disruption to shipping lanes in the region.
Ms Reeves said: “With conflict emerging in Iran and the Middle East, it is my responsibility, and that of this government, to chart a course through this uncertainty, securing our economy against shocks and protecting families from the turbulence we see beyond our borders.”
He said he was in regular contact with the governor of the Bank of England, international counterparts and key industries affected, and would meet North Sea bosses on Wednesday to discuss the implications they face and “work with them to manage this uncertain period”.
The planned meeting could lead to speculation that tax burdens may be taken into account, given the industry’s intense lobbying to remove the windfall tax.
However, he did not make any suggestions to cap energy bills or prevent increases in fuel costs.
He also boasted that he was the chancellor who “delivered the biggest increase in defense spending” since the last Labor government, but did not offer a timetable for when the 3 per cent of GDP spent on defense would be met.
Welcoming her record at the Treasury, Ms Reeves said: “This government has the right economic plan for our country, which is all the more important in a world that has become even more uncertain in the last few days.”
He added: “New forecasts from the Office for Budget Responsibility confirm that our plan is correct – inflation is falling, borrowing is falling, living standards are rising and the economy is growing.”
The chancellor said the changes to the GDP forecast took into account the fall in net migration and that despite this year’s fall, average growth over the next five years was “largely unchanged”.
“But I’m not yet satisfied with these forecasts,” he added, acknowledging that “the economy is not doing well for everyone yet.”
Among those challenging Ms Reeves on energy bills was Labor MP Graeme Downie, a member of the Commons energy select committee, who asked: “Can I ask her to look into this situation with energy bills and make sure we are investing wherever possible for our future energy security, while also helping people in the short term?”
SNP economic spokesman Dave Doogan described the spring statement as a “40-minute, self-aggrandising monologue” and challenged Ms Reeves.
He asked: “Does the chancellor have any ideas about how his tone-deaf monologue will reflect on the real economy, where growth is downgraded, unemployment is soaring and energy costs are skyrocketing?
“There is nothing in his statement about what he wants to do at a strategic level, about when energy will reach the price it was at the height of the Ukraine crisis – there is nothing there.”
Conservative former chancellor Sir Jeremy Hunt also told the House of Commons: “The Budget’s promise to cut home energy bills by £150 will ring hollow to many people.”
His update was also criticized by Tory shadow chancellor Sir Mel Stride, who asked whether the lack of new measures was to protect him from future U-turns.
He described the Spring statement as a “declaration of surrender” and accused the government of abandoning the British people.
He said: “Is that so? What indifference, a chancellor in denial. He talks about stability… which planet?” [the chancellor] Open?
“It’s lurched from putting in taxes, to destroying growth, to destroying headroom, to turning around and putting more taxes, destroying more growth. We’re constantly spinning like a fiscal hurricane tearing apart everything in its path.”
Liberal Democrat deputy leader Daisy Cooper said the spring statement showed the country was “stuck in a disastrous cycle of low economic growth”.
Ms Cooper called on the government to take a range of steps to “get Britain growing again”, including a better trade and security deal with Europe.
