The sun comes out for Rachel Reeves

What a brilliant new government we have – it is only a few weeks old and already interest rates are coming down. The Bank of England’s Monetary Policy Committee was obviously so impressed with the Starmer cabinet and itseconomic plans that it has cut the cost of borrowing for the first time in 4 years, from 5.25% to 5%.

OK, I am joking. The new government had nothing to do with the interest rate decrease at all. But it does show that in politics as in much of life, timing is everything.

Labour have inherited a mixed bag of economic conditions – some awful and some quite encouraging. For all the political spin Rachel Reeves has put on the “black hole”, Britain’s books obviously do not balance – there is really no denying it. The Office for Budget Responsibility does not intervene in politics if it can avoid it and if it says it has not been given all the information, then something very dodgy seems to have been going on.

But it is also true that everything is not quite as disastrous as Labour would have us think. The Bank has not just cut interest rates once because it thinks that inflation is coming under control, it is very likely to keep cutting them over the coming months.

Maybe they won’t get down to below 1%, which they were for much of the time since the credit crunch, but they have a long way to fall – that will certainly make many of us feel better. I know there are more savers than borrowers and falling interest rates will not help everyone, but they are good for spending and growth, and the UK certainly needs more of the latter.

There is more good news ahead. Labour are certainly going to see growth improve. After the recent recession a period of growth is to be expected and lower interest rates will help that too. Reeves has inherited an economy that is going to expand and she will have had little to do with that – though to be balanced, it is hard to see what the last government did to return the economy to growth either.

There is a huge caveat to all this though. The growth rate that we are expecting to see in the next year or so, will be anaemic when compared to what the UK used to manage. We are expecting growth this year of just 1% and next year of 1.9%. It is actually quite good by our recent terrible standards, but we used to grow by far more than that in a good year.

So, although lower interest rates will help, it is the long-term reforms of the economy that really matter.

This is why the new government has to seize the day and push for serious reforms immediately. Changes to the planning system, improving the training of the British workforce, a better NHS which means more people can get back to work, more infrastructure spending and better incentives for firms to invest too.

Lower interest rates will help but that is a short-term stimulus that will only have a short-term influence. Changing the structure of the British economy will take years but could change the long-term prospects for much higher growth.

But as for now the Labour government will take all the help it can get – whether it has earned it or not.