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LONDON, March 26 (Bernama-PA Media/dpa) - UK Finance Minister Rachel Reeves will acknowledge she needs to go “further and faster to kickstart growth” as she scrambles for savings to help balance the nation’s books without hiking taxes, PA Media/dpa reported.
The chancellor of the exchequer, as the finance minister is known in the United Kingdom, will be forced to take action to stick to her rule of meeting day-to-day spending through tax receipts, rather than extra borrowing, in response to gloomy forecasts from the budget watchdog.
The Office for Budget Responsibility (OBR) is widely expected to slash its forecast for economic growth, following similar recent revisions by the Bank of England and Organisation for Economic Co-operation and Development (OECD).
The government has also borrowed more than previously expected, with the cost of those loans rising – in part due to global turbulence.
In her spring statement the chancellor will tell members of parliament (MPs) that a “more insecure world” requires a greater focus on national security, with a promise to increase defence spending by £2.2 billion (US$2.85 billion) from April as part of the previously announced plan for the biggest boost in military funding since the Cold War.
She will say: “Our task is to secure Britain’s future in a world that is changing before our eyes.
“The job of a responsible government is not simply to watch this change.
“This moment demands an active government stepping up to secure Britain’s future. A government on the side of working people.
“To grasp the opportunities that we now have and help Britain reach its full potential, we need to go further and faster to kickstart growth, protect national security and make people better off through our plan for change.”
Reeves will tell MPs that she is proud of her record in office – despite the sluggish economic growth figures which have heaped pressure on her.
In its October forecast the OBR expected gross domestic product – a measure of the economy’s size – to grow by two per cent in 2025 and 1.8 per cent in 2026 but that is widely expected to be downgraded.
The Bank of England halved its growth forecast for the UK economy in 2025 to 0.75 per cent in February, and earlier this month the OECD cut its 2025 forecast from 1.7 per cent to 1.4 per cent.
Lower-than-expected growth will lead to smaller tax receipts than had previously been budgeted for.
The latest official borrowing figures, for February, were £4.2 billion higher than had been forecast by the OBR.
Reeves’ self-imposed rule to meet day-to-day spending at the end of the five-year forecast through receipts rather than borrowing was forecast to be met with £9.9 billion of headroom to spare in the OBR’s October assessment.
But the lack of growth and the increased cost of borrowing will eat into that headroom, forcing the chancellor to take action to ensure she continues to meet the rule – which is designed to show that Labour can be trusted with the public finances.
Reeves will say: “I am proud of what we have delivered in just nine months.
“Restoring stability to our public finances; giving the Bank of England the foundation to cut interest rates three times since the general election; rebuilding our public services with record investment in our NHS and bringing down waiting lists for five months in a row; and increasing the national living wage to give three million people a pay rise from next week.
Ahead of the statement, the chancellor has:
– Said the UK has “not been immune” from “increases globally in the cost of government borrowing”.
– Insisted that “economic stability is non-negotiable” and she will “never play fast and loose with the public finances”.
– Promised that she would not use the spring statement to raise taxes.
– Confirmed plans to tell Whitehall departments to cut administrative budgets by 15 per cent, expected to save £2.2 billion a year by 2029-30.
– Announced £2 billion of funding for social and affordable homes in England.
– Promised to train tens of thousands of construction workers to help deliver the promised 1.5 million new homes in England before the next election.
Alongside the statement, the government will release an impact assessment indicating how many people will be hit by previously announced plans to cut £5 billion off the welfare bill.
-- BERNAMA-PA Media/dpa
