BBC News business reporter Tom Espiner revealed that the UK government faced higher-than-expected borrowing in February, creating additional challenges for Chancellor Rachel Reeves just ahead of her upcoming Spring Statement. Official figures indicated a borrowing of £10.7bn last month, surpassing the £6.5bn prediction made by the government’s independent forecaster. Reeves is anticipated to introduce spending cuts in order to adhere to the economic regulations she has committed to upholding.
Darren Jones, chief secretary to the Treasury, emphasized the necessity of creating a state that is both agile and productive for the public’s benefit. He asserted that the government remains steadfast in its commitment to maintaining fiscal responsibility and will not take undue risks with public finances. Economists expressed concerns over the heightened borrowing in February, noting that this places added pressure on the Chancellor as she prepares for the Spring Statement on Wednesday.
Senior economist Dennis Tatarkov from KPMG cautioned that the recent borrowing figures raise the likelihood of Reeves failing to meet her self-imposed borrowing targets. Many advanced nations have similar regulations in place to reassure investors and uphold credibility in financial markets. Reeves’s primary rules include refraining from borrowing for day-to-day public spending and reducing debt as a proportion of the UK’s economic output by 2029/30. With limited risk-free choices available, the Chancellor may have to consider further spending cuts in addition to those already announced.
Recent proposals released by the government outline significant modifications to the benefits system aimed at achieving annual savings of £5bn in response to the escalating welfare expenditure in the UK. These measures include stricter assessments for personal independence payments (Pip) impacting numerous claimants, as well as a freeze on incapacity benefits. While defense spending is set to increase, funds will be reallocated from the international aid budget. Despite these efforts, Liberal Democrat Treasury spokesperson Daisy Cooper MP criticized the Chancellor’s approach as ineffective, particularly in light of the forthcoming National Insurance hikes affecting employers and their businesses. No comments were provided by the Conservative Party when contacted by the BBC
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