LONDON — The U.K.’s finance minister insists the British people are going to feel richer. Just not yet.
Rachel Reeves delivered a biannual forecast on Tuesday that insisted inflation, borrowing and debt will all fall by the next general election, benefiting people by £1,000 a year. Voters, she said, will ask themselves one question in 2029: “Are me and my family better off?”
And, the chancellor told MPs: “I am determined that the answer will be yes.”
Reeves has a reason to point to the future — right now, the country’s economic woes are stark. Tuesday’s forecast revised growth in 2026 down to just 1.1 percent, while unemployment is set to peak higher than expected at 5.3 percent. (Both are set to improve in later years.)
But she is also wary of boasting about numbers on a balance sheet that voters do not feel.
Many in Labour are cautious of repeating the mistakes of the U.S. Democrats in the run-up to the 2024 election, when their talk of economic improvement jarred with voters’ pocketbook pain. Or indeed copying the bombast of Donald Trump, who has claimed “we have the greatest economy actually ever in history.”
One U.K. government adviser, who was granted anonymity to speak frankly, said there is “increasing confidence” in the Treasury that people will genuinely feel the difference by 2029, yet “the lesson from Biden is that the numbers might be good but they’re not enough.”
A U.K. government official stressed the Treasury does not see its messaging through the lens of the U.S., but said Reeves is trying to “tread a careful line” between hope and realism.
A minister added: “There’s a risk that what we’re telling people is a world away from their conversations down the pub on a Friday. We just have to hope that at some point everything clicks and the better numbers coincide with people feeling it in their pockets.”
Even where Reeves could whisper good news, war in the Middle East is wiping out her delicate calculations in real time.
The key elements of Tuesday’s forecast by Britain’s Office for Budget Responsibility (OBR) were finalized on Feb. 12, before Trump launched bombs at Iran or the U.S. Supreme Court ruled against his global tariff regime. Crude oil prices were already 18 percent higher on Tuesday than the OBR had assumed.
The U.K. government official referenced above said Reeves’ messaging was due to be more positive until the outbreak of war in the Middle East prompted her to “course correct” and gear her language more toward “charting a course through that uncertainty.”
Take one of her best pieces of news: that energy bills will fall by £117 a year from April. One think tank, the Resolution Foundation, warned Tuesday that a sustained oil price shock could mean they go back up by £500 per year from July.
“To be honest, the challenge now is how much the higher energy prices will persist,” said a second minister. “That’s the only game in town.”
‘Doing Biden-y things’
Reeves is steering through all this by pitching herself as a force for stability. Yet on top of all her other worries, her Labour Party is in turmoil. Many MPs believe she will be toppled along with Prime Minister Keir Starmer after regional elections in May.
One Labour official raised an eyebrow at press reports that the chancellor was hoping to cut taxes before the next election: “It’s a bit presumptuous, isn’t it?”
All this means Labour’s conversation has moved beyond simply avoiding the Democrats’ mistakes.
Labour MPs and aides tried to learn lessons from the Democrats’ defeat in 2024, with several exchanges and meetings brokered through center-left U.S. think tanks such as the Progressive Policy Institute.
Claire Ainsley, director of the PPI’s project on center-left renewal, said: “The British government appears to be learning the lessons from the Democrats, which is talk about the economy in the way people experience it.”
But, Ainsley went on, “the Democrats also had very strong economic growth in which to do that and that is not the projection for the British economy in the 2020s. So Labour has to be very careful about not promising that people are going to be better when there are so many uncertainties.”
The U.K. government adviser referenced above added: “Things have definitely moved on from 2024 when there was this idea that doing kind of Biden-y things would result in being rewarded.” Likewise, they added, “[Trump’s] economic numbers are terrible. They’re not something to emulate.”
The living standards crisis
Reeves played with the best hand she had on Tuesday — marginal improvements since her last set of forecasts in November.
The OBR now expects a budget surplus of £23.6 billion in 2029/30 (up from £21.7 billion) and for borrowing to fall from 4.3 to 1.8 percent of GDP. Reeves talked up Britain’s hopes to get closer to Brussels after Brexit, which “cut us off from our closest trading partners.”
Reeves argued that the change that Labour promised at the 2024 election, when it won a landslide victory, had “already started” — although the OBR said its forecasts had changed little since November.
Treasury officials also focused their steady-as-she-goes message on rallying the business world, while many Labour MPs agonize over voter disillusionment, especially after a YouGov poll Tuesday put Labour in joint-third place behind the left-wing Green Party.
After months of leadership chattering, this was enough for some Labour MPs. “No drama is good news,” said one. Another said they were “very” optimistic that voters would feel the effects of increased housebuilding. “The single biggest thing we can do is focus on stability.”
But Reeves accepted the economy is “not yet working for everyone.” The OBR modeled one scenario — with demographic pressures and a “significant shock” every nine years — in which Britain’s debt would explode from 95 percent of GDP now to 325 percent in the 2070s.
Paul Ovenden, Starmer’s former No. 10 director of political strategy, argued that the U.K. is facing more than simply a cost of living crisis. There is now, he said, a “living standards crisis” whose roots are deeper, and that means structural change is needed.
“A cost of living crisis is basically about a spike in prices,” said Ovenden. “That is massive and real, but typically you would expect it to recede as wages catch up with inflationary spikes.
“A cost of living crisis doesn’t tell half the picture that we have here — which is that most people who made their career after the financial crash have seen their wages stall while the costs of housing, childcare, student debt and other things rise dramatically.”
One government frontbencher complained: “The entire strategy is that voters will be poorer in 2029 but we’ll (apparently) be able to point to the cranes in the sky.”
No one believes you
Even when good news lands, the public may not feel it. The recent fall in inflation means that prices are still rising, just by slightly less.
A poll of 2,010 people by pollster More in Common between Feb. 27 and March 2 found 59 percent were not sure the cost of living crisis will ever end — the highest in four years. “The only economic change the public have noticed is the rise in unemployment,” said Luke Tryl, More in Common’s director.
Tryl added: “The big risk for the chancellor is she follows the mistakes of both President Biden and Trump — reeling off headline stats that seem to bear no relation to people’s everyday lives and appearing blind to the fact that, for many, the economy feels as broken as ever.”
On the day he resigned as No. 10 chief of staff in February, Morgan McSweeney told MPs a story of workers who had an £8 payment taken from their bank accounts one week early, one of the MPs recalled. There was a spike in calls to the organization that took the payment from people who could not afford it.
And Reeves’ job is made harder by individual policy decisions cutting through on the doorstep more than her good news, including cuts to winter fuel payments for pensioners (on which she later U-turned).
The frontbencher quoted above said: “Voters, rightly, don’t believe we are making their lives more affordable because our first big decision was to make pensioners on £13,000 poorer.”
‘Stop telling them things are shit’
Labour’s other problem is that it is losing votes from different parts of the voter coalition it won in 2024 — to both the right-wing Reform UK and the left-wing Greens.
Labour officials have long felt that for working-class voters, “if you tell them everything’s bright and beautiful, they’re going to say no it isn’t,” a former senior official said.
But those turning to the Greens present a different problem — they are more affluent and their values more optimistic, the ex-official said. “If you tell them all the time that things are shit, you’re not connecting to them,” they added. “So you have to find a sweet spot between hope and realism. I don’t think Labour’s found that yet.”
Starmer’s own MPs — who have forced Reeves into repeated, costly U-turns — will also need to find this sweet spot, especially with pressure coming to spend more on defense and save money on welfare. Some are already pressing for a change to high interest rates on student loans taken out since 2012.
Labour MP Callum Anderson said: “This government is only halfway through the hard yards, which the chancellor recognized. Fiscally, the whole parliamentary Labour Party will need to be sober and clear-eyed … we will need to back the chancellor.”
But one left-wing, anti-Starmer backbencher complained of Reeves’ statement: “It all sounds just so tired and flabby. No one is listening, not really.”
Best-laid plans
The biggest threat to Reeves’ plans lies beyond her control — in the White House.
Some Labour MPs take the latest crisis in the Middle East as yet more evidence that Britain’s model of economic forecasting is out of date.
Ruth Curtice, a former senior Treasury official who leads the Resolution Foundation, suggested events in Iran may actually vindicate Reeves’ long-term approach. “I don’t think any system in the world could take account for prices moving literally two days before the budget and set fiscal policies on that basis,” Curtice said.
Jeremy Hunt, Reeves’ Conservative predecessor as chancellor, also backed her keep-calm-and-carry-on approach. “I had Covid and Ukraine and Rachel has Iran,” he told POLITICO. “In such an unpredictable environment you can’t base your political strategy on the economic wheel of fortune suddenly turning good. But voters are not stupid: if they can see you are taking long term, difficult decisions and not just courting votes, they will give you some credit.”
But the war in Iran could “more than undo” many of Reeves’ wins — including on energy bills, and using tax levers to freeze petrol prices for motorists, said Curtice.
In all, it feels like a long 13 months since Reeves said she was taking a point of inspiration from Trump. “I’m trying to channel my inner American and be more positive about things,” the chancellor said at the time. Perhaps one day he’ll let her.
Noah Keate and Sam Francis contributed reporting.