Rachel Reeves is about to unleash an avalanche of misery - we’re just days from hell
The Chancellor has left the nation completely unprepared for the unfolding disaster. She claims to have restored stability, but instead she's destroyed growth, by hiking taxes by another £70billion or so, while splurging on the state. The Tories had already pushed the tax take to its highest since the war. Reeves has taken it to wartime levels. We’re now handing over a bigger share of our national output than when Britain was fighting Nazi Germany and Imperial Japan combined. And still she can’t find money for the military, despite the rising threat from Russia, China and Iran. Now we're heading for the crunch.Today feels eerily like early 2020, at the start of pandemic. Back then, we watched, baffled, as Covid spread around the world. Stock markets shrugged. Then went into meltdown when it struck. Today, we’re staring at a looming global oil shock, and again, politicians and markets are in denial. Iran has Donald Trump over a barrel, as it refuses to open the crucial Strait of Hormuz tanker supply route. Tehran will now sit tight and wait for oil shortages to bite. That moment is getting closer. No wonder Trump is in meltdown. Soon he won't be the only one.The lights are literally going out in South Korea as fuel reserves run low. The country is even more dependent on imports than we are. If Hormuz stays blocked, it’ll be our turn. And thanks to Reeves, we’re horribly exposed to the coming shock.She’s not to blame for the Iran war and looming oil shock. She’s even shown flashes of sense, urging more North Sea drilling. Not that Ed Miliband will listen. He wouldn’t recognise common sense if it bopped him on the nose.Reeves inherited a fragile economy that was just starting to recover. She killed that stone dead with her brainless tax and spend blitz, while borrowing like crazy because she still couldn’t balance the books. We're on course to borrow a staggering £130billion this financial year. That was the case before Iran. And the cost of servicing that debt is about to explode.Before the Iran crisis, 10-year gilt yields sat around 4.25%. Now they’ve just rocketed to 5.15%. Every 1% rise in yields adds roughly £12billion a year to borrowing costs. The chancellor has just lost her fiscal head room again.Soaring gilt yields buried Calamity Liz Truss. Under her, they peaked at 4.42%. They're far higher than that today, and still climbing. Yet Reeve still claims to have restored stability. She won't be saying that for much longer.Inflation just hit 3.3%. At some point, the Bank of England will hike interest rates. Banks are already increasing mortgage rates in anticipation. Two-year fixes have jumped from 5.37% to 5.85% in a month. More than 1.5million borrowers rolling off fixed-rate deals this year are about to be hammered. Energy bills will rise too, in a double whammy. And that's on top of all those extra taxes.Unemployment dipped in March to 4.9% but vacancies are falling fast. The squeeze on household finances is tightening across the board.Reeves is the only Labour figure who even pretends to care about balancing the books. Her backbenchers just want to spend, spend, spend. So do would-be successors to Keir Starmer, from Angela Rayner to Andy Burnham to, heaven help us, Ed Miliband.But we can’t borrow a penny more without spooking bond markets further, and sending yields still higher. Reeves is trapped. We all are. More tax hikes will further crush growth, but that won't stop Reeves. The avalanche is already rumbling. Unless Trump finds a quick way out of Iran, it’s going to sweep everything aside. Starting with the chancellor.
