The world faces a terrifying economic crisis and Labour has left us exposed (Image: Getty)
You might say there’s nothing new in that. The UK has been in a desperate state since the financial crisis in 2008. Our economy, productivity and wages have barely grown since. We’re all poorer as a result. On top of that, we’ve had Brexit rows, the pandemic, war in Ukraine, the energy shock and cost-of-living crisis. Tax is at an all-time high, but we still borrow £150billion a year to balance the books. The national debt is heading to £3trillion, equal to our entire economy. It’s been one crisis after another. Thanks to war in Iran, it’s about to get really nasty.
US president Donald Trump seems to think you can win a war simply by declaring victory. In practice, it’s not that easy. The other side has a say too. The evil theocratic Iranian regime is in a fight to the death, and is prepared to take the global economy down with it. By closing the Strait of Hormuz and hitting energy infrastructure across the Gulf, it could trigger the biggest oil price spike in history. One that makes the energy shock after Russia’s invasion of Ukraine look like a blip.
Yesterday bought a tsunami of bad news. Gas prices jumped 35%. Oil surged to $117 a barrel, with some warning it could hit $200. Just weeks ago, it was $65. The UK put on an economic horror show of its own. Pay growth has slumped to a five-year low. Unemployment has climbed from 4.1% to 5.2% under Labour. Borrowing costs are surging, with gilt yields pushing past “Calamity” Liz Truss levels. The FTSE 100 plunged, wiping tens of billions off UK companies.
Unless the oil and gas get through, Britain, Europe and Asia all face a full-blown economic crisis. But thanks to years of policy failures, culminating in this economically illiterate Labour government, we’re right on the front line.
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Even if the war ended tomorrow, which seems unlikely, the damage is done. Restarting energy production will take months, possibly years. If disruption continues, supplies could dry up. That hits far more than petrol prices. Flights could be grounded if jet fuel runs low. Food transport costs would rocket. Fertiliser and animal feed both require oil. We could face rationing and panic buying. Inflation will soar. So will interest and mortgage rates. Energy bills will jump by £300 in July.
As countries scramble for the same dwindling supply of oil and gas, Donald Trump could try to save his skin by blocking exports from the US and Venezuela. Then we’d see the true meaning of ‘America First’. As if all that wasn’t bad enough, we were in a mess even before this began.
Chancellor Rachel Reeves has killed growth with her tax hikes and business raids. GDP has flatlined while youth unemployment rockets as she makes hiring youngsters too expensive. We learned today that Reeves borrowed a record £14.3billion in February. That’s before the Iran war began. The energy crisis could make her plight even worse by bursting two financial bubbles, in the artificial intelligence and private equity markets.
Wannabe PM Angela Rayner has done her bit, making hiring even less attractive with her Employment Rights Bill, which piles £5billion in red tape onto employers. Then there’s Ed Miliband.
The UK has some of the highest industrial energy costs in the world. Businesses are shutting down or moving abroad, and that was before this crisis. Our energy secretary insists today’s turmoil vindicates his net zero charge, but ignores two massive problems. First, the cost. Expanding wind and solar requires huge investment in the grid, pushing our bills ever higher. Second, he’s wilfully blocking new North Sea oil and gas development just as global prices surge.
That leaves Britain having to import even more gas, provided we can actually get it. We also sacrifice billions in tax revenues from selling oil, at a time when we need every penny. To block new drilling when the world is crying out for energy and prices are sky-high is sheer insanity.
Now these three fantasists face a brutal reality check. Unless the war ends in days, Reeves, Rayner and Miliband will be blown to pieces. I don’t much fancy Keir Starmer‘s prospects either.