The IMF took their growth forecast down to 1.1 per cent for 2025 whilst raising their inflation forecast to 3.1 per cent for this year.
They blamed the government's increases in managed energy prices, water prices and the movement up in the longer-term interest rate. This followed from the budget, which worried markets with too much borrowing.
On cue, the borrowing figures for the year ended March 2025 came in £15bn above the recent OBR forecast. The government's increased spending on public sector wage rises, lost productivity, and more benefit payments overpowered the tax rises.
Last year's borrowing was up by £20bn on the previous year, when it should have been falling away as we recovered from the pandemic lockdowns.
The Chancellor is forever locked in by her own fiscal rules. As growth slows, the amount she needs to borrow rises too high. Tax revenue disappoints, and benefit spending soars. She ends up having to look for some spending cuts or more tax rises, which could slow growth again.
Rachel Reeves went to Washington to tell the world the UK is open for business
GB News
She went to Washington to tell the world the UK is open for business and is s great place to invest. She then stumbled over explaining why we have the dearest energy in the advanced world, why she has just made it so much dearer to employ people, and why she has raised taxes on businesses.
To top it all, why has the government regulated to make it more difficult for property and business owners when dealing with tenants and staff?
Worse still is her failure to use the great chance of her Washington trip to offer a good deal for the UK and for the US to the Treasury Secretary.
He will be handling the UK/US trade issues this week. Where is the big positive offer of a full free trade deal, removing our tariffs in return for no US tariffs?
Why can't we offer tariff-free as we have with the EU? Why is everything conducted in secrecy as if the government is ashamed of its offer? Normally, a country wanting a free trade agreement sets out what it is proposing and argues for it, to reassure the public at home that it is putting forward a good deal and to win over doubters in the trading partner country.
I fear they are offering too little and do not sense the opportunity. The US is not mad with the UK as it is with China, or cross as with the EU.
The EU and China have large surpluses and very restrictive policies on crucial imports, so the US expects plenty of movement. The UK and US goods trade is in balance.
What should Rachel Reeves be offering? She should stand up to the Foreign Office and veto giving the Chagos islands away, along with a large dowry to Mauritius we cannot afford.
The US does not want their crucial naval base passing into the control of a friend of China. She should offer to take our high tariffs down on certain foods, and remove the 10 per cent car tariff.
She should remove the digital tax aimed at US corporations and moderate the online legislation to allow free speech.
She should aim to get the special US tariffs on cars and steel removed, and preferably all tariffs by both countries.
She should jointly plan with the US more relaxations in service trade, where both the US and UK excel as the world's number one and number two service exporters.
She then needs to come home and unpick the damage she has been doing. High taxes stop growth. Banning new oil and gas at home means relying on dearer imports. No growth means a bigger deficit.
Disaster lies that way. A growth strategy needs tax cuts more than a free trade deal. Both together could do the job.
