08-05-2025
Labour warned of 'fight of our lives' against Nigel Farage as Rachel Reeves is battered by MPs over UK's 'economic doom loop' - with fears of more tax rises or spending cuts to fill '£60bn black hole'
Labour MPs have been warned they face the 'fight of our lives' against Nigel Farage in the wake of local elections.
Cabinet Office minister Pat McFadden appealed for the party to pull together in 'a battle for the very future and the heart and soul of our country'.
But the stark message, at a behind closed-doors meeting last night, comes amid evidence of deepening rifts on the government benches.
The Labour Growth Group, an influential caucus of new MPs, has sounded the alarm that Mr Farage will become PM unless the UK gets out of an 'economic doom loop'.
Pressure is mounting on Rachel Reeves as stalling growth wreaks havoc with her spending plans.
The Niesr think-tank has become the latest forecaster to downgrade Britain's prospects, cautioning that the Chancellor might have to fill a black hole of more than £60billion in the government's books.
Donald Trump's trade war has been blamed - although Ms Reeves' massive national insurance raid is also seen as helping to crush activity.
Chris Curtis, chair of the Labour Growth Group, told the Guardian: 'Britain is stuck in a complete economic doom loop. We've had low growth.
'That's led to pretty awful cuts. It's led to public services that are broken. And it's led to disillusionment and division among the country...
'Until we get out of that economic doom loop, Nigel Farage is going to become prime minister. I think the stakes are that high.'
Mr Curtis said Whitehall was 'hooked on business as usual and will need shock therapy to get off it … No 10 talks about governing as insurgents, but we're often behaving like caretakers of decline. They have to be more forceful in driving that culture through the system.'
As panic spread following Reform's surge in the local elections - when Labour lost nearly 200 councillors and the previously safe Commons seat of Runcorn - the Red Wall group of MPs have demanded a 'break away from Treasury orthodoxy'.
Left-wingers have been calling for a 'wealth tax' to replace cuts to the winter fuel allowance and benefits.
There has also been a push from so-called 'Blue Labour' faction for a stronger crackdown on immigration.
Niesr predicted that the UK economy will grow by 1.2 per cent this year 'amid low business confidence, high uncertainty and rising cost pressures'.
In its previous forecasts in February, Niesr had pointed to 1.5 per cent growth in 2025.
As a result, the think-tank said the Government is now expected to miss its fiscal rules requiring UK national debt as a share of the economy to fall and to be on course for a budget surplus.
In the Government's spring statement, Ms Reeves said state finances were on track to give a headroom worth around £9.9billion by 2029-30.
Niesr's forecasts suggest this could now be set for a shortfall of £62.9billion over this time frame, suggesting the Treasury could need to look at more spending cuts or tax increases to achieve a surplus.
Stephen Millard, Niesr interim director, said: 'The Chancellor's self-imposed and arbitrary fiscal rules have led to a situation where twice a year the Chancellor has to either find further departmental savings or announce politically unpalatable tax rises.
'The uncertainty created by this leads to low investment and lower growth, the precise reverse of what the government wants to achieve. We have to rethink the fiscal framework.'
It is the latest body to trim back the UK's economic growth contexts amid pressure from changes to US tariff policies on the global economy.
Last month, the International Monetary Fund (IMF) cut its UK growth forecast by 0.5 percentage points to 1.1 per cent for this year.
Adrian Pabst, deputy director for public policy at the organisation, said: 'The Government's ambition of boosting growth and living standards in every part of the United Kingdom requires a comprehensive, credible plan of economic transformation which is yet to emerge.
'While planning reform and infrastructure investments in London and the South East will add to GDP growth, we need higher public investment in second-tier cities and poorer regions to unlock greater business investment.'
The Conservatives meanwhile accused Ms Reeves of 'playing fast and loose with the public finances'.
Shadow chancellor Mel Stride added: 'She should have learned lessons after she was forced into an emergency budget in March.
'Now she is once again teetering on the edge of breaking her own fiscal rules.
'This inevitably means rising speculation about further painful tax rises come the autumn, all at a time when businesses are in desperate need of certainty, and households are worried about rising bills.'
