If the Labour Party is making cuts to welfare and wider Government spending, you know the fiscal circumstances must be pretty tight. Let’s not pretend that any of the large new cohort of Labour MPs came into politics to mimic the David Cameron and George Osborne double act, only a decade later.

But this is precisely where they find themselves, with Work and Pensions Secretary Liz Kendall announcing the biggest cuts to the welfare budget since 2015, while Chancellor Rachel Reeves is set to announce a swathe of spending cuts in next Wednesday’s Spring Statement — the largest for five years.

Telegraphed as early as December last year, mere months after her Autumn Budget, Reeves’s spending review will be a direct response to even lower economic growth than the already meagre forecasts. That was before the economic instability wrought by Donald Trump’s presidency, let alone the defence spending implications of the new administration’s approach to Nato and Ukraine. The headwinds blow ever harder.

Labour’s large majority ought to have given the Government more breathing room. But the majority was sought on a “don’t frighten the horses” manifesto, with a specific promise not to raise “the big three” — income tax, National Insurance and VAT — and a commitment to somewhat inflexible fiscal rules.

These were signals intended to reassure voters and markets respectively, but today they serve as a pair of tight fiscal handcuffs, limiting Reeves’s room for manoeuvre and functionally mandating her to cut spending. Might the Labour Party have been better served by leaving the door open at the last election to tax rises, suffering a slightly smaller but still workable majority?

Reeves finds herself boxed in by Labour’s own risk aversion. The party lacked enough confidence to fight off the Conservatives on tax and fiscal policy — even as the Tories themselves were in disarray, and had broken a manifesto pledge on raising National Insurance (though it was later reversed).

In isolation, the welfare cuts are reflective of a wider journey that Labour has made with respect to disability benefits. Regardless of the cause of increases in the reported levels of mental ill health, the implications for the welfare bill of a large growth in claimants are profound. MPs on the Government benches may be uncomfortable, but they are recognising the need to get people back into work as a kindness, as much as it can represent a painful shove.

Labour’s leadership will need to tread carefully in the coming weeks. This comes down to more than just fractious relations with MPs who didn’t go into politics to vote for austerity and cutting welfare for the least well-off. It’s a fundamental strategic question: how does the UK break out of two decades of economic stagnation? When the Labour Party is making cuts to Government spending, it is out of necessity, not ideology.

Some of the ingredients are there, and a recognition that things cannot go on as they have is a start. There has also been a diagnosis of poor economic growth rooted in the regulatory state, as well as initial reforms to unnecessarily strict planning rules. Only growth can offer a stable footing to continue funding public services into the future. But Labour is still being called out for having an insufficiently defined and tangible “Theory of Growth”.

Growth may be the mission, but the roadmap remains unclear. Underlining the opacity, the Telegraph has reported that the Office for Budget Responsibility will downgrade the country’s expected economic growth in 2025 by half, from 2% to 1%. How can the Labour Party promise that, in four years, Britons won’t end up back in the same position as under the outgoing Tory government, with more debt and less fiscal leeway? And without sunlit uplands to march towards, what is the point of being a loyal MP?

A theory of growth will help this government tell its story, deliver the improvement in living standards and public services that matter to voters, and give MPs a flag to rally around. Illustrating the challenge, only this week planning permission for homes in England fell to a fresh record low. For all that growth is the Government’s stated priority, it doesn’t yet feel like it. The Chancellor had better get cracking.

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James Sean Dickson is an analyst and journalist who Substacks at Himbonomics.

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