Why liberating UK economy from remaining EU rules is Rachel Reeves' only hope
As economic storm clouds gather over the UK, here’s what Chancellor Rachel Reeves needs to do to keep her job
If you had any doubts that 2025 is going to be a challenging year for the UK economy, then the Bank of England’s revised growth forecast issued last week should act as a cold shower. Media coverage naturally focussed on the interest rate cut of 0.25 per cent that had already been widely trailed as likely, indeed the markets had been pricing in a series of such interest rate cuts for this year even before the general election last summer.
An interest rate cut is real and will be felt by many within a month; however a forecast is not real, it is a calculated estimate with some forecasters being better at it than others. As information about the real economy becomes available and policy impacts can be seen, it is to be expected revisions will be made.
Last week’s BoE revision of figures produced as recently as November shows growth for the whole of 2025 at only 0.75 per cent – half its original estimate of 1.5 per cent.
This is not an outlier; it is a further example of downward revisions by forecasters who are now taking a far more pessimistic view of Labour’s economic measures. When the Office for Budget Responsibility produced its estimates for the Chancellor’s October Budget, it had to cut its previous growth estimates because of Rachel Reeves’ taxes. Last month even the reliably unreliable International Monetary Fund had to revise its GDP estimates down too.
The inconvenient truth the Labour government has to face up to is that since it took office – when the UK was the fastest growing economy of the G7 group of nations – it has managed to talk down economic optimism, pile on higher business taxes, take on a huge amount of debt that now costs a staggering annual interest payment bill of £65 billion and been warned repeatedly that it is laying the foundations for economic gridlock.
Having promised growth would be a top priority the Chancellor, Reeves is caught in a dilemma of her own making. Thanks to her expensive and discouraging Budget, she has caused the possibility of recession – a prospect that may look more of a reality when the official Office for National Statistics data for the last quarter is revealed this week.
She faces a choice – does she carry on regardless and sacrifice the country’s economic prospects for the near future at least, or does she change policies to lift the economy but sacrifice her own credibility by admitting her errors and have to resign?
Although it will not stop Labour politicians saying so, Jeremy Hunt, Rishi Sunak and Liz Truss cannot be blamed for what is about to happen – it is Labour that is in the driver’s seat, it is Reeves who has her hands on the steering wheel, and it is she who is crashing the economy.
Any impacts from Brexit, Covid lockdowns and the Russian invasion of Ukraine have already worked their way through the economy – the flat-lining British economy is now absolutely owned by Labour and Reeves.
She and Keir Starmer are therefore desperate. Suggesting regulators can come up with changes that will boost growth is like asking a Mother Superior to organise a baby boom.
The other idea doing the rounds is to “move closer to Europe” which is just as absurd when other major European economies such as Germany, France and Italy are in serious trouble too.
The latest ploy is to say that because of the likelihood of President Donald Trump introducing tariffs on EU goods, we should move closer to the EU as an act of solidarity. Well solidarity won’t butter the parsnips, it will simply put the UK in the US President’s crosshairs.
How will additional tariffs of ten or 20 per cent on Scotch whisky and spirits, cashmere, tweeds and woollens, help Scotland’s economic growth? How will tariffs on Britain’s aero industry or engineering and construction equipment help our manufacturing businesses?
The answer surely lies in the UK maintaining its own independent sovereign trade policy that reduces tariffs for imports of goods we do not make or grow (so prices can come down for the British public) – and negotiate trade deals with developing markets where there is exceptional growth so we might export more.
The EU’s own publicity machine tells us the tariff and quota-free deal we have with its 27 member states is the best it has ever negotiated. I take them at their word. So why should we give them greater access to our fisheries, why should we accept onerous regulations and standards that erect protectionist barriers and will prevent us from entering into agreements with more attractive markets?
What motivates people to prescribe policies that are anathema to economic growth and limit the possibilities of us creating a truly dynamic and open economy?
Those advocating such a “deal” do not appear interested in more trade, but are interested in us accepting laws we have had no say in formulating and do not fit our needs. They want us to be tied up in EU laws like a spider captures its prey so we can never escape. Yes, we have left the EU, but we have not left its laws – thousands of which remain on the statute book often holding us back.
The latest example is the EU’s proposed regulations on artificial intelligence which will undoubtedly leave the UK in the slow lane of technological opportunity. Thankfully the Labour government is already saying it is not interested in being caught in this EU fly-trap, which is at odds with its desire to reset relationships.
It should go further and recognise there are many other EU regulations that can be replaced by fit-for purpose British ones. (Car insurance restrictions being but one example where premiums have been lowered as a result).
Only by liberating our economy can Labour find a way of leading us to real economic growth.
Brian Monteith is a former member of the Scottish and European parliaments and a senior advisor to the Tax Reform Council
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