Chancellor Rachel Reeves has made it clear that she will not be implementing “tax and spend” policies in the upcoming Spring Statement. She stated that there will be no tax increases or increases in government budgets, emphasizing the need for fiscal responsibility. Reeves also highlighted that the government cannot afford the level of spending hikes that occurred during the last Labour government.
The chancellor is expected to announce cuts to some government departments in order to reallocate funds, with a particular focus on increasing defense spending by reducing the aid budget. Reeves stressed that in the current economic climate, taxing and spending excessively is not a viable solution for improving living standards and public services.
Despite implementing significant tax and spending increases in her autumn Budget, Reeves is now facing challenges as government borrowing exceeded expectations in February. The Office for Budget Responsibility predicted borrowing to be £6.5 billion, but it reached £10.7 billion, reducing the fiscal headroom available to the chancellor. Additionally, economic growth forecasts are expected to be revised downwards, adding further pressure on the Treasury.
In response to these economic challenges, Reeves is expected to announce further cuts to certain Whitehall departments to align with her economic rules. These rules include not borrowing for day-to-day public spending and reducing debt as a percentage of the UK economy by 2029-30. While Reeves reiterated her commitment to funding public services, calls have been made by some, such as Labour grandee Lord Blunkett, to relax the fiscal rules to address pressing social issues like youth unemployment
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