The Treasury has identified billions of pounds in potential spending cuts across welfare and various government departments, as the chancellor’s flexibility is increasingly constrained. These proposed cuts will be presented to the Office of Budget Responsibility (OBR), the official forecaster, in preparation for the upcoming Spring Statement.
It has become clear that significant changes have occurred since the last Budget in October, where Chancellor Rachel Reeves had around £9.9bn in room for borrowing within her self-imposed targets, according to the OBR. However, global economic challenges and alterations in the long-term economic outlook for the UK are expected to erode this headroom, a feature likely to be highlighted by the OBR in its forthcoming forecasts.
In response to the economic pressures and uncertainties facing the government, the Treasury will outline “major measures” to the OBR, aimed at aligning tax and spending adjustments to meet the chancellor’s fiscal rules. Factors such as global economic conditions and geopolitical tensions have contributed to increased borrowing costs for the government, with the euro area experiencing stagnant growth and UK productivity figures falling short of expectations.
Preparations for the Spring Statement will see the unveiling of corrective budget actions that not only align with existing policy objectives but also address the emerging fiscal gap. The anticipated measures may include new welfare reductions targeting the significant growth in health-related benefits, with plans to be outlined by Work and Pensions Secretary Liz Kendall. Additionally, Cabinet Office Minister Pat McFadden and Health Secretary Wes Streeting are set to announce an efficiency drive within the civil service, aimed at achieving substantial cost savings through potential staff reductions. The chancellor is expected to emphasize the government’s commitment to welfare reform in order to boost employment and enhance productivity within the health sector, reflecting a determination to champion measures that promote national prosperity and security
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