It’s the Chancellor’s job to get the economy moving. But she isn’t up to it.
Chancellor Rachel Reeves has crushed the economy, forcing the Bank of England’s hand (Image: Getty)
Rachel Reeves controls fiscal policy. She decides what to tax, what to spend. That gives her huge power over the UK economy. Done correctly, a good chancellor can create the conditions for growth and prosperity. Reeves isn’t good. She’s terrible. The most unpopular chancellor in history. Which means somebody else has to do the job for her, and today that’s fallen to the Bank of England.
Reeves has trashed the UK economy. It shrank 0.1% in both October and September, with no growth in August. She’s driving us into a recession. This one even has her name on it. It’s been dubbed the Reevescession and rightly so.
In just 18 months, she’s slammed the country with £66bn of new taxes and plans to borrowed tens of billions more. She’s blown through her fiscal headroom twice and spent like it’s going out of fashion, mostly throwing money at public sector workers and welfare claimants. She calls it fixing the foundations.
The result? Growth has stalled, inflation and borrowing costs are higher than any G7 country, and unemployment has jumped from 4.2% to 5.1%. Younger workers are being wiped out, thanks to her £25bn National Insurance ‘jobs tax’ and repeated inflation-busting minimum wage increases. Businesses simply cannot take the risk.
It’s a disaster. She’s a disaster. We can’t afford her. Now the Bank of England has tried to do its bit, cutting interest rates by 0.25% to 3.75%.
I wouldn’t bet the farm on the BoE either. Governor Andrew Bailey kept interest rates too low too long, then foolishly dismissed the threat of resurgent inflation as “transitory”.
The BoE was too slow to hike rates to curb inflation, allowing the cost-of-living crisis to rage out of control. We’ve all paid a high price for that.
Bailey and the BoE’s monetary policy committee (MPC) have been slow to cut rates on the way down too, though it’s hard to blame them. UK inflation is too high thanks to Reeves, as employers hike prices to pay for her jobs tax. She’s made the MPC’s job far harder than it needed to be.
But now the BoE had to act. Why? Because the UK is heading for a recession and cutting rates is the only tool it has to kick-start the economy.
This is humiliating for Reeves. It exposes how badly she’s sunk the economy.
Personally, I think the MPC should have gone further and cut rates by 50 percentage points to 3.5%.
That would have given businesses and mortgage borrowers an early Christmas present, and injected some life into a stalling economy. It’s about time we had some good news.
The MPC didn’t dare. Why? Inflation dipped to 3.2% in November but that’s still above the BoE’s 2% target, thanks to Reeves.
Today’s cut is better than nothing, but it’s a disgrace that the Bank of England is doing a job the Chancellor should have done herself.
The UK deserves a chancellor who can actually do the job, rather than one who plunged us into disaster, and leaves others to clear up the mess any way they can.
