Rachel Reeves pushing for Brexit reset to help boost economy

Rachel Reeves is pushing for a better relationship with the EU in a bid to boost Britain’s economy and avoid the need for tax hikes or spending cuts.

The Chancellor is one of a number of Cabinet ministers involved in the “reset” of post-Brexit relations which is set to ramp up at a summit in Oxfordshire on Thursday.

The International Monetary Fund (IMF) said in its latest update on the world economy that UK GDP is likely to grow by 0.7 per cent this year, higher than the 0.5 per cent it previously forecast.

Ms Reeves welcomed the upgrade, but she is understood to have instructed officials they should focus more on long-run growth projections than the ups and downs of short-term forecasts. She has also said that because GDP growth has more influence on the public finances than individual tax or spending measures, it is the best way to bring down the deficit and control public debt.

The Chancellor said: “While it’s welcome that the IMF is forecasting growth to pick up this time, I am under no illusion to the scale of the challenge facing the economy and the inheritance this new Government faces. That is why we are already taking the tough decisions to fix the foundations of our economy, so we can rebuild Britain and make every part of our country better off.”

Growth for 2025 is forecast by the IMF to come in at 1.5 per cent, higher than most other G7 countries. That projection is weaker than the Office for Budget Responsibility (OBR), whose forecasts are used to determine whether the Government is hitting its borrowing rules – raising the prospect of a black hole in the public finances if the OBR is forced to downgrade its expectations.

The IMF said in its latest update on the world economy that UK GDP is likely to grow by 0.7 per cent this year, higher than the 0.5 per cent it previously forecast

A senior Labour source told i that Ms Reeves sees international relations with the EU and others as a key part of building a stronger economy over the long term, saying: “It’s not just about economic security, it’s about national security. It’s taking into account how the world has changed.”

The Chancellor is not expected to attend the European Political Community (EPC) meeting at Blenheim Palace, but has been engaged in conversations about how best to use the gathering to increase the UK’s growth potential.

Sir Keir Starmer has said his post-Brexit “reset” will include measures to smooth trade between Britain and the Continent – although the Government is likely to face demands from Brussels for measures which could prove unpalatable, such as a youth mobility scheme. Any major move to grow closer to Brussels could prompt a backlash from other ministers who are worried about alienating Leave voters who backed Labour at this month’s election.

Nick Thomas-Symonds, the new minister for European relations, has been given broad latitude to oversee the strengthening of ties with the EU, and is expecting to hold regular meetings with his Brussels counterparts, according to insiders. He will attend the EPC alongside the Prime Minister.

Sir Keir and Ms Reeves both heralded the EPC at a Cabinet meeting on Tuesday, according to a No 10 spokesman. The Prime Minister said the gathering “will show further progress on our European reset; leadership on Ukraine and European security; and tackling the smuggling gangs responsible for trafficking people on perilous journeys”.

The spokesman added: “The Chancellor said that national security and economic security underpinned each other, and the Government was focused on delivering economic stability, increased inward investment, and reduced barriers to trade.”