Rachel Reeves insisted Labour has \u201cthe right economic plan\u201d for a world that has become \u201cyet more uncertain\u201d as she delivered a spring forecast that downgraded growth for this year.<\/p>\n
The chancellor was addressing MPs against the backdrop of surging energy prices<\/a>, as investors fret about the impact of the war in the Middle East. The cost of a barrel of Brent crude was up another 7% on Tuesday, at $83.20.<\/p>\n Reeves said she was in close touch with the Bank of England governor, Andrew Bailey, as they monitored the situation and would meet representatives of the North Sea energy industry on Wednesday.<\/p>\n New forecasts from the independent Office for Budget Responsibility<\/a> (OBR), published alongside her statement, showed that as Reeves said, \u201cinflation is down, borrowing is down, living standards are up and the economy is growing\u201d.<\/p>\n \u201cThis government has restored economic stability,\u201d she said, in a deliberately low-key statement that, as expected, contained no substantive policy announcements.<\/p>\n Reeves conceded that GDP growth was now expected to be \u201cslightly slower\u201d this year, however, down to 1.1% from the previous forecast of 1.4%, after weaker than expected data in the final quarter of 2025 \u2013 but stronger in future years, at 1.6% in 2027 and 2028, and unchanged at 1.5% in 2029 and 2020.<\/p>\n The OBR also predicts that the unemployment rate, already almost at a five-year high<\/a>, will continue rising, to a peak of 5.3% this year \u2013 up from a previous estimate of 4.9%.<\/p>\n The forecaster said this had been \u201cdriven primarily by entrants into the labour force struggling to find work amid subdued hiring demand\u201d.<\/p>\n Reeves emphasised that unemployment was then expected to decline, to 4.1% by the end of the forecast period: lower than when Labour came to power.<\/p>\n The OBR said it had revised down its near-term growth forecast partly as a result of weaker-than-expected net migration, but it had not yet taken into account the tough new policies recently announced by the home secretary, Shabana Mahmood, including making refugee status temporary<\/a>.<\/p>\n Despite instructing the OBR not to judge her against her fiscal rules at this spring forecast, Reeves emphasised that her buffer \u2013 or \u201cheadroom\u201d \u2013 had increased in its latest projections, to \u00a323.6bn from \u00a321.7bn at the time of the November budget.<\/p>\n This improvement has been aided by lower gilt yields, or borrowing costs, though these have been rising again in recent days as investors bet on resurgent inflation.<\/p>\n As the Middle East conflict deepens, the chancellor promised she would \u201cchart a course through that uncertainty, secure our economy against shocks, and protect families from the uncertainty we see beyond our borders\u201d. She added: \u201cI am in no doubt about Britain\u2019s ability to navigate the challenges we face.\u201d<\/p>\n Analysts have said that if the price rise proves sustained, it will have a knock-on effect for petrol prices and for household utility bills, which Reeves has promised to cut.<\/p>\n