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Chancellor Rachel Reeves will on Tuesday claim she has rebuilt Britain’s public finances so that they can withstand any shock from the war in Iran, as she attempts to promote what allies claim is a “stability dividend”.
Reeves’ Spring Forecast was originally billed by Treasury figures as a deliberately “boring” and policy-free event, in which she hoped to give business some breathing space after a series of chaotic fiscal statements.
But the conflict in Iran and spiralling energy prices have created new drama, with pressure rising on Reeves from opposition MPs to signal that she will not press ahead with increases to fuel duty from this September.
Although Reeves is not expected to explicitly commit to reviewing that policy, she will say the Iran conflict and disruption to global energy markets underscore the need to continue with tight fiscal policies.
“This government has the right economic plan for our country in a world that has become yet more uncertain,” Reeves will say. “Because of the decisions we have already taken, we have a stronger and more secure economy. Inflation and interest rates are falling and in every part of Britain, working people are better off.”
Government officials said the chancellor would watch energy price movements closely in the coming months.
Reeves has promised to hold just one fiscal event a year — the autumn Budget — and Tuesday will see her make a brief speech lasting about 20 minutes to set out new forecasts by the Office for Budget Responsibility, the independent forecaster.
Treasury officials said Reeves would not set out new policies or tax changes and would strike a “confident” posture about the outlook for the UK economy.
Reeves is likely to delay confronting looming problems including a rise in unemployment and a massive hole in the defence budget. Policies to try to raise the UK’s sluggish growth rate will follow in a speech later in March.
In her November Budget Reeves built “headroom” against her fiscal rules of £21.7bn, reassuring bond markets. She has increased taxes by £66bn since the last election in 2024 to help achieve some fiscal stability.
While Reeves has a “reserve” to cushion higher energy bills later in the year if necessary, the Treasury notes average household bills will fall by £117 from April and be pegged at that level for the following three months.
The disruption to Middle Eastern gas supplies is a problem for Britain even though Qatar accounted for less than 2 per cent of its imports in 2024, given the effect on prices.
The UK depends heavily on gas for heating and electricity, meaning gas price spikes weigh heavily on the economy. Energy secretary Ed Miliband is trying to reduce the electricity system’s reliance on gas but that is a longer-term project.
Simon French, chief economist at investment bank Panmure Liberum, said it would be unwise for Reeves to announce “knee-jerk” policy responses to the surge in energy prices given the uncertainty of the situation in the Gulf.
“There is a real premium on waiting and seeing how the cards land,” French said. If energy prices became a prohibitive burden on disposable incomes and household spending, there might be a case for intervention, he said.
French added that “endless tweaking” of policy was in any event not an enabler of economic growth. “There is a premium on stability right now.”
Reeves’ statement will respond to OBR forecasts that are likely to show a downgrade to growth this year even before any impact from the energy shock induced by the US-Israel attack on Iran.
While the OBR in November pencilled in growth of 1.4 per cent this year, the Bank of England in February predicted growth of just 0.9 per cent for 2026. Economists polled by Reuters expect 1 per cent growth.
The fiscal watchdog will not deliver a formal verdict on the probability of the chancellor meeting her self-imposed fiscal rules, following a change announced by Reeves in November aimed at embedding her determination to hold only one fiscal event a year.
But it will still be possible to calculate how much “headroom” Reeves has against those rules, and analysts do not expect a major shift from the £21.7bn figure that emerged from the November Budget.