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Economics editor Faisal Islam revealed that Chancellor Rachel Reeves is gearing up to take decisive action on the issue of rising cost of living in the upcoming Budget. She emphasized the importance of both the government and the Bank of England working together to combat inflation, as the UK is projected to have the highest inflation rate among the G7 nations in the coming years. It is speculated that the government may step in to reduce energy bills by potentially lowering the 5% VAT currently charged on energy or reducing regulatory levies on bills.
As the government awaits the next forecast from the Office for Budget Responsibility (OBR), it is anticipated that Chancellor Reeves may need to introduce tax hikes or spending cuts to adhere to the borrowing rules she has set for herself. Despite the looming possibility of tax increases, Reeves reiterated her commitment to not raise rates on income tax, VAT, or National Insurance as outlined in the manifesto promises. She attributed the anticipated fiscal measures in the Budget to the uncertainties stemming from geopolitical and trade issues around the world and assured that any tax changes would primarily affect those “with the broadest shoulders.”
Referring to the economic tensions concerning China, Reeves stressed the significance of prioritizing national security over economic relations. In light of China’s recent export control measures on critical materials for tech manufacturing, which prompted threats of increased tariffs from US President Donald Trump, Reeves expressed concerns and called for China to refrain from imposing barriers and limiting access. She highlighted the need for a balanced approach in addressing challenges posed by China while also exploring opportunities to sell into Chinese markets, particularly in financial services and other economic sectors.
Amid ongoing negotiations with the US government and pharmaceutical companies, Reeves acknowledged the possibility of increased NHS medicine prices in exchange for lower tariffs and investments. She acknowledged concerns raised by large drug companies about low pricing in the UK leading to project pauses or cancellations, emphasizing the importance of securing investments to ensure access to life-saving drugs for NHS patients. Reeves reassured that efforts are being made to attract more pharmaceutical investments in Britain to facilitate access to cutting-edge medical treatments
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