Reeves needs green shoots – but a full recovery will require determined rates cuts by the Bank of England, says ALEX BRUMMER

As Rachel Reeves launches into her latest fiscal update today, she may find solace in the adage that ‘the darkest hour is just before dawn’.

So far, her occupation of Number 11 has been a calamity.

The axing of the winter fuel allowance, the mistaken empowerment of the Office for Budget Responsibility (OBR), the confidence-sapping rise in employers’ National Insurance contributions and the departure of thousands of wealth creators to Milan, Dubai and elsewhere are among her triumphs.

Economic and fiscal conditions moved against the Chancellor. But it would be disingenuous to suggest this is down to Donald Trump’s erratic tariff war and rejection of Nato. 

Britain’s woes set in much earlier. An economy going gangbusters has ground to a halt because of the self-harm of the change in fiscal rules and the October Budget. 

And there is more aggro to come from business over the unwanted employment rights legislation. That is no more than a sop to trades union paymasters.

Together, slower growth and higher-than-forecast interest rates wiped out the over-risky £10billion or so headroom for current spending in the budget long ago. 

Hence the desperate effort to find cuts in welfare and public spending. Even if Reeves finds the missing funds, that may not be the end of it. The widely leaked OBR forecast cuts growth to around 1 per cent. Other forecasters including the Bank of England already suggest that is too upbeat.

Chancellors have a habit of being monstered for seeing the ‘green shoots’ of recovery too early. Tory Norman Lamont learned this lesson in the early 1990s.

When upturns do occur, they often arrive with a whoosh. I am reading the new biography of the late president Ronald Reagan by Max Boot. He recalls that in 1982-83 the US fell into deep recession. 

But after some aggressive interest cuts by Federal Reserve chairman Paul Volcker, output came roaring back and Reagan was re-elected in a landslide. Here, the green shoots seen by Lamont grew into an enormous bean stalk when the UK fell out of the exchange rate mechanism.

Can Reeves and Labour hope for the same? The fiscal rules require the Budget to be in balance, mandating tough decisions on spending. The Chancellor created space for an uplift in investment spending. 

She is to unveil £2billion for affordable housing. Projects such as an East-West fast rail link, bringing Oxford and Cambridge research hubs closer together, already have been unveiled.

Say it quietly, but the economy may not be entirely moribund. The S&P UK purchasing managers index jumped last month to its highest level since September, boosted by services. A full recovery will require determined interest rates cuts by the Bank of England. Don’t hold your breath.

Name and shame

Credibility at the Financial Conduct Authority (FCA) is undermined by the sclerotic speed of investigations. 

Bank of England governor Andrew Bailey was still at the FCA’s helm nearly six years ago when it pledged a probe into the implosion at Neil Woodford’s asset management group. 

Since then, the FCA has secured partial compensation for Woodford investors from ‘corporate director’ Link but many, including this writer, are still nursing losses. 

MPs on the All-Party Parliamentary Group are furious that a report, more than five years in the making, is still to see the light of day.

Insouciance at the FCA has allowed many of the parties, including broker Hargreaves Lansdown that promoted Woodford funds to the bitter end, to escape censure. The report on responsibility for the debacle needs to be published. This is a case for naming and shaming for which there are no excuses.

Second coming

Britain’s innovative pharma sector offers a path to greater output and prosperity. GSK’s Shingrix vaccine, to protect against shingles, already is a multi-billion-pound blockbuster.

Evidence is now emerging that it could be efficacious in preventing dementia caused by Alzheimer’s disease. GSK is gaining access to large scale NHS and GP data which could confirm that it works.

Followers of drug and vaccine development may recall that the obesity compound Ozempic, which has transformed the Danish economy, was conceived as treatment for diabetes. Fascinating.