Rachel Reeves

A plan that is even more important in a world that has become yet more uncertain in the last few days. With unfolding conflict in Iran and the middle east, it is incumbent on me and on this Government to chart a course through that uncertainty, to secure our economy against shocks and to protect families from the turbulence we see beyond our borders. I want to express my gratitude to members of our armed forces as they serve across the globe to protect our country. I want to reassure this House that I am in regular contact with the Governor of the Bank of England, with my international counterparts and with key affected industries, including our maritime sector. Tomorrow I will meet our North sea industry leaders to discuss the implications they face and work with them to manage this uncertain period. In an increasingly dangerous world, I am proud to be the Chancellor that is delivering the biggest uplift in defence spending since the cold war, with £650 million committed in January to upgrade our Typhoon fighter jets, a new Royal Navy frigate launched from Rosyth last week and, just yesterday, our £1 billion helicopter deal with Leonardo. I am in no doubt about Britain’s ability to navigate the challenges we face. The plan that I have been driving forward since the election is the right one: stability in our public finances, investment in our infrastructure, including our armed forces, and reform to Britain’s economy. It is a plan to reshape our economy and break with the failed ideas of the past: building growth on not just the contribution of a few people in a few places, but in every part of Britain, with a state that does not stand back but steps up; strengthening our trading relationships and our alliances; creating capacity in our economy through affordable housing, better transport and free childcare; and being an active and strategic state, building growth and economic security in an uncertain world. Stability is the single most important precondition for economic growth. That is why we have committed to a single major fiscal event a year, limiting major policy changes to the Budget, and giving businesses and households the certainty they need. Today the new forecasts from the Office for Budget Responsibility show that our plan is the right one: inflation is down; borrowing is down; living standards are up; and the economy is growing. This Government have restored economic stability. The previous Government allowed inflation to skyrocket to over 11%, stoked interest rates to 15-year highs and delivered the first Parliament on record where people were poorer at the end than at the start. That is the Conservatives’ record, and I recognise the impact it had on families. We promised change at the election, and I understand the responsibility on me to deliver that change. I know that the question that people will ask themselves at the next election is, “Are me and my family better off?” I am determined that the answer will be yes. The change we promised has already started: there have been six cuts in interest rates since the general election—the fastest pace of reduction in 17 years—and inflation has fallen. For businesses, that means lower capital costs and greater certainty, and for families, it means more money in their pockets to spend in local shops and on the high street. Those interest rate cuts will save households over £1,300 a year on a typical new fixed-rate mortgage. Real wages have risen by more in the first 18 months of this Labour Government than in the first 10 years of the Tory Government. At the Budget, I went further to deliver the change that people rightly demand. I extended the 5p cut in fuel duty for a further five months, froze prescription charges for the second year in a row and froze rail fares for the first time in 30 years, and I am taking £150 off energy bills from next month. In February, the Bank of England confirmed that inflation will fall faster because of the action I took at the Budget, and today the Office for Budget Responsibility expects inflation to come down even faster than it forecast in the autumn. In the current global context, with the risk that rising energy prices will put upward pressure on inflation, the action that I have taken is even more crucial. Keeping inflation low and stable is the best way to support family incomes and reduce pressures on the cost of living. But that is not all we have done: this Labour Government have funded 30 hours of free childcare for working families; we are rolling out free breakfast clubs at primary schools; and we are set to achieve the biggest reduction in child poverty over a Parliament since records began by reversing the shameful two-child limit imposed by the Conservatives. That is the moral choice, for the children who will no longer go to school hungry and for the women who will no longer suffer the grotesque indignity of the rape clause. Scrapping the two-child limit is an enduring investment in our children and in our future to realise the potential of young people that would otherwise be wasted. The Tories have said that they would reinstate that destructive policy, and now Reform is saying exactly the same thing—two parties united in their intention to plunge nearly half a million children back into poverty at a single stroke. If you import failed Tory politicians, you get failed Tory policies too. Labour—and only Labour—has the right economic plan for our country. [Hon. Members: “More!”] Last year, we demonstrated the resilience of Britain’s economy in the face of global headwinds with the fastest growth of any G7 country in Europe. Today the Office for Budget Responsibility has updated its growth forecasts, including reflecting lower net migration. Average growth across the forecast period is largely unchanged, while the OBR has adjusted the profile of GDP so that it grows slightly slower in 2026—[Interruption.] And then faster in both 2027 and 2028. GDP is forecast to grow by 1.1% in 2026, 1.6% in both 2027 and 2028 and 1.5% in both 2029 and 2030. I have always said that growth is for a purpose—to make working people better off. I can confirm that GDP per person is set to grow more than was expected in the autumn, with growth of 5.6% over the course of this Parliament. That compares with a fall in GDP per capita in the last Parliament. By the next election, after accounting for inflation, people are forecast to be £1,000 a year better off. [Hon. Members: “Hear, hear.”] I did not hear the Opposition that time! We promised change, and we are delivering that change. The economy is growing, living standards are rising and inflation has fallen, but I am not satisfied with those forecasts. I know that the economy is not yet working for everyone and that the deep economic scars left by the Conservative party and their mates in Reform are still blighting the lives of too many people. In today’s forecasts, unemployment is set to peak later this year and then fall in every year of the forecast period, ending at 4.1%, which is lower than it was at the start of the Parliament. However, young people in particular are still suffering from the aftermath of years of Tory mismanagement. In the last five years of the previous Government, the number of young people not in education, employment or training increased by 113,000. The number of inactive young people reached record highs under the Conservative Government, and over the last decade, apprenticeship starts by young people fell by 40%. This Government will not leave an entire generation of young people behind. We are already taking action to prioritise young people with additional investment to reform apprenticeships and through the £820 million youth guarantee, providing young people with employment support and a guaranteed job. In the coming weeks, I will set out more reforms to undo the Tory legacy of neglect, and give young people the support and the opportunity that they deserve. In the face of global uncertainty, we beat the forecasts last year. In the year ahead, the choices that we are making give me confidence that we will beat them again. In the year ahead, more of the choices that we have already made will come into effect: discounts on business energy costs; trade deals with India, the US and the EU; reforms to back our entrepreneurs; investment in our infrastructure; skills funding for further education; and more planning reforms—progress opposed by the Conservatives, opposed by Reform, opposed by the Liberal Democrats, and opposed by the Green party too. It is Labour and only Labour that has the right plan for our country. Our plan for growth is grounded in a profound rejection of the failed economic dogmas of the past—the trickle-down, trickle-out thinking that produced ever-diminishing returns for working people. I know that an economy cannot be working if it is delivering for only a few people in a few places; I know that it matters where things are made and who makes them; and I believe that the working people who keep our country moving deserve a fair day’s pay for an honest day’s work. Since the election, I have been making the big choices that will bring about the deep structural changes that our economy needs so that it works again for working people: the choice to take on vested interests and back the builders, not the blockers; the choice to increase public investment and protect our public finances with new fiscal rules; and the choice to give people in all parts of our country the opportunities that they deserve by reforming the Treasury spending rules in the Green Book to unlock investment in all of our urban, rural and coastal communities. Those are the right choices for our country—for security, stability and growth. Today’s forecasts from the Office for Budget Responsibility show that they are starting to pay off. I am clear-eyed about where the opportunities for the British economy lie in this Parliament and beyond. In my second Mais lecture in two weeks’ time, I will set out three major choices that will determine the course of our economy into the future: to go further in strengthening our global relationships, breaking down trade barriers and deepening alliances with our European partners for a more secure and connected economy; to go further in backing innovation and harnessing the power of AI, so that entrepreneurs and innovators thrive here in Britain, and so that working people reap the rewards; and to go further in transforming our economic geography so that we can build growth on a broad and stable basis, spreading opportunity and unlocking opportunity in every part of Britain. I came into politics because I believe in Governments who stand up for working people; that everyone, no matter where they grow up, deserves security and a fair chance to achieve their potential; and that being able to manage the bills, afford a home and pay for a holiday should never be too much to ask. When Governments lose control of the economy, as the Tories did, it is working people who pay the price—in their pay packets, in their bills and in their mortgages. That is what the Conservatives inflicted on working people over 14 years. We had austerity, which cut off investment; Brexit, which cut us off from our closest trading partners; and Liz Truss’s disastrous mini-Budget, cheered on by the Leader of the Opposition and by the hon. Member for Clacton (Nigel Farage)—oh, he’s not here today. [Laughter.] Five Prime Ministers, seven Chancellors, and 11 plans for growth, and at the end of it all, it was the only Parliament on record where living standards were worse at the end than they were at the start, and there was a £22 billion black hole in the public finances. That is the Conservatives’ legacy. And make no mistake, the Tory tribute act on the Reform UK Benches would do exactly the same thing. They may have changed the colour of their rosettes, but the British people will not forget that they are the exact same people who wrecked our public services and our public finances in the Tory Government—the same people, the same policies, and the same disastrous outcomes for working people. The Tories left our country, our people and our allies exposed. They had no plan and no intention to fund their pledge to spend 2.5% of GDP on defence. Reform UK would go one step further, by ditching our allies and siding with Russia, while the Green party wants to take us out of NATO and jeopardise our alliances. Green Members are shaking their heads. I do not know if they have changed their policy, but it was to take us out of NATO. Let me be clear: it is Labour and only Labour that can provide social justice, national security and fiscal responsibility. In its forecast today, the Office for Budget Responsibility shows that we are set to reduce borrowing by nearly £18 billion compared with the autumn. This year we are set to borrow less than the G7 average—something that the Tories never achieved in any of their 14 years. The forecast today shows that public sector net borrowing is set to fall from 4.3% this year to 3.6% next year, then to 2.9%, 2.5% and to 1.8% in 2029-30. Even after funding other measures announced since the Budget, including the new special educational needs system that was set out by my right hon. Friend the Education Secretary last week, headroom against the stability rule in 2029-30 has increased from £21.7 billion to £23.6 billion, and headroom against the investment rule is also higher at £27.1 billion. Debt is now set to be lower in every year of the forecast compared with the autumn. It is because of the choices that I have made to keep our public finances stable and restore our credibility that we can invest in the priorities of working people. That means investment in our communities with Pride in Place; investment in our schools to fix crumbling classrooms and give every child the education that they deserve; and investment in our NHS, to bring waiting lists down and with a record cash settlement. I have never accepted that we have to choose between social justice and fiscal responsibility, because there is nothing progressive, nothing Labour, about spending £100 billion a year—that is £1 in every £10 of what the Government spend—just paying the interest of the debt racked up by the Conservatives. After their disastrous mini-Budget, our debt interest rate soared towards the highest in the G7. From my Budget to this forecast, while average yields rose for the rest of the G7, yields on UK Government debt fell. The Tories squandered Britain’s credibility. My plan is rebuilding it. Already, because of the action that I have taken, we are expected to spend nearly £4 billion less on debt interest next year than was forecast in the autumn. If we stay the course and stick to our plan, and our debt interest returns to the G7 average—where it was before the Conservatives wrecked things with Liz Truss’s mini-Budget—we will have £15 billion a year more for the priorities of working people and to make working people better off. That is the prize on offer. That is the prize within our grasp. This is the right plan—a plan that is more necessary than ever before in a world of uncertainty. It is a plan for a stronger and more secure economy; inflation and interest rates falling; resilient public finances; and in every part of Britain working people better off. Every additional patient treated in an NHS hospital, every child lifted out of poverty, and every breakfast club in every school is because of the choices that we have taken and because I have the right plan for our country. Let this House be in no doubt: every pound that we have invested, every pound in the pockets of working people, and every pound that we have secured in this forecast today can be wiped out by a change of course. We must reject a return to austerity, protect our public services and invest in Britain’s future. We must reject the temptation of easy answers and reckless borrowing, protect family finances and get the cost of living down. We must reject the political instability that would put at risk all the progress that we have made. My plan is the right one. I am in no doubt about how great the rewards can be if we stay the course. The forecast today confirmed that the choices this Government have made are the right ones: stability in our public finances, interest rates and inflation falling, living standards rising, more children lifted out of poverty, more appointments in our NHS, more investment in our infrastructure, a growing economy, and more money in the pockets of working people. These are the right choices, this is the right plan, and I commend this statement to the House.