How Rachel Reeves can escape the doom loop

Rachel Reeves is trapped in an economic ‘doom loop’: high debt, low growth and higher debt again. But, as pessimists’ eyes turn to the Chancellor’s Budget next month, there is a way she can turn that loop into a ‘virtuous circle’.

The doom loop theory of Reeves’s economy has so far gone like this:

Following a fiscal event, tax receipts come in lower than expected, growth forecasts are downgraded, inflation forecasts rise – and a fiscal ‘black hole’ emerges.

To fill in the hole, the Chancellor hikes taxes because her backbenchers won’t let her make cuts.

The tax hikes further hamper growth, weighing down employment as companies struggle under the burden.

The Chancellor calls another fiscal event – and we return to step one.

But history doesn’t need to keep repeating itself. After all,