Chancellor Rachel Reeves is preparing another "growth push" as the Labour Party braces for a potentially bruising defeat in the upcoming local elections. The Chancellor is expected to unveil a renewed focus on fiscal discipline, closer ties with the European Union, and planning reforms to ease party nerves.
Political Context
The local elections come at a challenging time for Prime Minister Keir Starmer, who faces scrutiny over the appointment of Peter Mandelson as US ambassador. This week, Starmer's former chief of staff Morgan McSweeney and former Foreign Office head Philip Barton will give evidence in Parliament regarding Mandelson's vetting. Despite the pressure, Starmer has insisted he will lead Labour into the next general election.
Reeves' Economic Strategy
To shore up support, Reeves is expected to deliver flagship speeches throughout May and June. According to sources familiar with the matter, she will outline plans to go "further and faster" on boosting growth. This includes another attempt to overhaul the UK's planning system and accelerate the adoption of artificial intelligence.
Since becoming Chancellor, Reeves has staked her political reputation on driving economic growth. However, her two tax-heavy budgets have drawn criticism for stifling businesses. Her first budget raised taxes by £40 billion, followed by an additional £26 billion in 2025. Despite these measures, growth has remained sluggish, with the economy expanding just 1.3% over the past year and only 0.1% in the final quarter of 2025.
Global Challenges
The International Monetary Fund recently downgraded the UK's growth forecast more than any other G7 country, citing the impact of the Iran war on global trade. Growth for 2026 was revised down by 0.5 percentage points, with the UK particularly exposed due to trade disruptions. Other G7 nations, as well as Russia, Spain, South Africa, and Nigeria, are expected to suffer less severe economic hits.
As part of her upcoming speeches, Reeves is expected to present a "responsible" plan to help households and businesses weather the fallout from the Iran war. This includes targeted support for energy bills, particularly during winter. Allies of the Chancellor have indicated that any major bailout would be funded through borrowing, though this could lead to higher interest rates and mortgage payments.
