The Chancellor has made one reckless decision after another. After promising “iron discipline”, she went on a Budget tax-and-spend spree that left her with just £9.9billion of fiscal headroom.
That was always a wafer thin margin given that the government spends a staggering £1.23trillion every year. And it disappeared in weeks as taxes destroyed growth and her national insurance raid wiped out 275,000 jobs.
In March, Reeves restored the fiscal headroom in her Spring Statement, primarily by shaving £5billion off disability benefits.
She’s already booked that saving but now it’s under threat from a Labour rebellion, as furious MPs want her to backtrack.
If Starmer caves in, she’s back to square one.
As if that wasn’t bad enough, the economy shrank by 0.3% in April, and a string of economic bodies have slashed their growth forecasts.
Again, that’s mostly down to Reeves, although Donald Trump’s tariffs haven’t helped.
She’s borrowing a fortune every month, adding another £17.7billion to the national debt in May.
All it takes is one trigger to finish her off. And it could be about to explode.
War in Iran threatens to shatter what little economic stability remains.
Israel is bombarding the country in the hope of stopping its nuclear programme and destabilising the fundamentalist regime.
And Donald Trump is hovering.
He’s considering whether to back Israel with direct military strikes on Iran’s nuclear facilities.
Only the US has the firepower to do serious damage, thanks to its 30,000-pound “bunker buster” bomb, designed to hit fortified targets deep underground.
Trump has threatened to use it – then backtracked – but his warning stands. He’s reportedly given Tehran a 10-day deadline to come clean or face the consequences.
There are plenty of reasons not to act. US intervention in the region doesn’t have a great track record, after Iraq and Afghanistan.
Iran could retaliate with drone attacks on regional oil facilities or shipping lanes. And it has an even more powerful card to play. It could shut the Strait of Hormuz.
The Strait is a global economic chokepoint.
Around one-fifth of the world’s oil passes through it every day, with tankers funnelling out of the Persian Gulf and into the Arabian Sea.
Iran has threatened to shut it down before.
Even if US naval forces could keep the route open, insurers would hike premiums to the point where commercial shipping would grind to a halt.
Tankers could be rerouted, but that adds costs and delays. JP Morgan reckons oil could hit $120 or even $130 a barrel – double what it was at the start of this month.
That would be disastrous for Reeves. Pump prices would rocket. So would inflation. We’d be facing another energy shock, and the other one isn’t over yet.
It will blow her shaky sums to pieces. She’d have to raise taxes, slash spending, or rip up her fiscal rules entirely.
Or all three. And if the UK gets sucked into the conflict, that’ll cost us even more.
Either way, her plans are toast. This is the last thing the UK economy needs. But there’s nothing Reeves – or Labour – can do to stop it.
That bunker buster bomb will blow up more than a mountain in Iran. It will go nuclear on our economy too. And for once, Reeves won’t be to blame.