Delivering a fiscal statement when you know that world events have rendered it out of date is an odd experience. You are acutely aware that the forecasts, and the assumptions that underpin them, are already wrong and the measures inadequate.
This happened to me with the 2020 budget on March 11, just three weeks after I became chancellor. I knew as I stood at the despatch box that the coronavirus was overwhelming it, and that the £30 billion support package I was announcing would be nowhere near enough. We ended up spending £373 billion.
I suspect Rachel Reeves felt somewhat similar delivering the spring forecast on Tuesday and championing falling inflation, lower energy bills and increasing headroom.
In these circumstances, the most important thing is to avoid succumbing to self-pity. With my budget in March 2020, It would have been all too easy to wail “why me?” and to complain about being the first chancellor in living memory to have to deal with a pandemic. But self-pity is the least productive emotion. Instead, you have to assess where the economy is vulnerable, what you can do to address these weaknesses, and what contingency plans are required.
The situation in Iran means it’s imperative the chancellor gets on with this work. The conflict is a symptom of a more unstable world, not the cause.
As a nation, you either shape events or are shaped by them. I fear that in our handling of this crisis, we have fallen into the latter category.
Britain had no affirmative role in the planning or execution of this operation. But that hasn’t protected our sovereign territory from attack, or insulated our economy from the aftershocks. We must learn the lessons of this episode.
Regrettably, the most likely scenario right now is that the Iranian regime survives. Unlike Libya and Syria, which were personal dictatorships, the Islamic Republic of Iran has a broad and dispersed structure. Our assessment was always that removing the regime’s leaders wouldn’t collapse it.
Despite its deep unpopularity, there is no ready-made alternative. Revolutions require both an inspirational figurehead and organisation; neither is currently present.
After the brutality with which January’s protests were put down, and the failure of President Trump to deliver on his promise that help was on the way, it is unlikely that people will take to the streets again.
The regime’s new leadership suggests that its character won’t change either. There have been no significant defections, and Ahmad Vahidi, the new head of the Islamic Revolutionary Guard Corps (IRGC), has a history of repressing internal dissent with extreme force. He is wanted by Interpol for the bombing of a Jewish community centre in Buenos Aires in 1994.
The likely new supreme leader, Mojtaba Khamenei, son of Ayatollah Ali Khamenei, is a hardliner close to the IRGC and another figure who takes a bloody approach to protesters. This is not the team you appoint if the aim is a deal, sanctions relief, and a rapprochement with the international community.
If the regime doesn’t collapse, how will this end? Well, the most likely outcome is that, relatively soon, the US runs out of significant targets to hit. When this happens, they will announce they’ve destroyed Iran’s missile programmes and navy, and declare victory.
But the nature of the Iranian regime means that it will attempt to rebuild these capabilities. Israel, for eminently understandable reasons, finds the prospect of Iran amassing a war chest of sophisticated ballistic missiles unacceptable. So they will be determined to tackle this threat whenever it re-emerges — and after the past week, they will have the tacit sympathy of many Gulf states.
It is likely the US will get involved to ensure any operation’s effectiveness and because, as secretary of state Marco Rubio said last week, they expect Tehran to retaliate by hitting more US bases.
Punitive strikes against Iran’s missile facilities will become the contemporary equivalent of Britain’s policing of the North-West Frontier with Afghanistan in the 19th century, or Rome’s approach to the Germanic tribes in the second century AD; a preventative mission that needs to be repeated regularly.
This rhythm will have profound implications. It will exacerbate volatility in the energy market. It will also make it harder for the Gulf states to escape their geography: financial centres require geopolitical stability as well as regulatory certainty.
For the UK, it underlines the need to restore our hard power, our ability to think about the world as it is, and our willingness to use our own assets. I can tell you from personal experience that our decision to participate in the strikes against the Houthis meant we were able to influence the Biden administration’s approach to the problem. We mustn’t let a particular interpretation of international law limit our global role.
Our government lacks strategic acumen. Given how much notice we had of these strikes, why was no ship moved to the Mediterranean to help protect our interests and allies? It is frankly embarrassing that the French appear to be doing more to protect Cyprus than we are, even though Cyprus is only a target because of our sovereign bases there.
Reinvigorating our hard power will require us to spend more, and more sensibly, on defence. But Reeves must simultaneously rebuild our fiscal position. This will require cuts elsewhere.
In a more disorderly world, shocks will be more frequent. But you only have the capacity to respond to them if your public finances are sound. If this crisis drags on, could Reeves afford to offer energy support on the scale that the government did after the Russian invasion of Ukraine?
None of this will be easy. But the way to secure greater certainty in an uncertain world is to combine more control over your own affairs with the ability and the determination to project power. We either shape events or they shape us.
The Sunday Times supports the Richmond Project (richmondproject.org) and the work it undertakes. Rishi Sunak has donated the fee for this column to it