Britain’s Minister of Finance Rachel Reeves announced thousands of pounds of expense cuts on Wednesday, as he sought to fulfill a budget deficiency in the midst of the drop in growth and the highest loan costs since his first tax plan, published last fall.
« The responsible choice is to reduce our debt and loans in the coming years to spend more on the priorities of the working people, » said Reeves, being directed to legislators in Parliament.
Reeves said that the well -being cuts already established last week are estimated that they save £ 4.8 billion in the welfare budget and that the measures would be increased to return to work. He also established measures to suppress tax evasion that would increase revenue for the treasury.
Warning that « we live in an uncertain world », Reeves said that defense spending would increase to 2.5% of GDP with reductions in aid abroad to help fund the increase. He also said that the labor government planning reforms « would mean that the construction of houses would reach a maximum of forty years » and to help grow the economy.
The Minister of Finance had already pledged to comply with his « self-imposed tax rules » that were established in the « fall budget » last October: to make sure that the day-to-day expense is charged for tax revenue and that public debt falls as part of economic production for 2029-30. On Wednesday, he reiterated his position that these rules were « non -negotiable ».
The United Kingdom Minister of Finance Spring Declaration was It is delivered alongside the latest economic forecasts of the Office for Budget Responsibility (OBS), the country’s independent public watchman.
The Ope, said Reeves, had reduced the growth forecasts of the United Kingdom by 2025, and halved its previous estimate of 2%.
« I am not satisfied with these numbers. That is why on this side of the house we are serious to take the necessary actions to grow our economy, » he said, responding to the reduction in the growth of the open.
He added that the OBS had updated its growth forecast for 2026 « and each year later, » however, with the watchman who pretended GDP growth of 1.9% by 2026, 1.8% by 2027, 1.7% by 2028 and 1.8% by 2029.
« At the end of the forecast, our economy is greater than compared to Obra’s forecast at the time of the budget, » he said.
Reeves concluded his speech telling the legislators that « the world is changing. »
« We can see it and we can hear it. A changing world demands a government next to the working people. Acting in their interest. Acting in national interest. It does not retire from challenges. »
Following the statement, L’Ob published its economic forecasts He said that the Chancellor had restored the « Treasure Fiscal Hall » in the middle of a « risky perspective ».
« Before counting the policy, the costs of interest of the highest debt and other changes in forecast left the current budget in deficit at 4 billion pounds in 2029-30.
« This is still a small margin in the face of the risk of hits after interest rates, productivity or global trade. »
“A changing world”
Since its initial budget was presented last October, Reeves has been under increasing pressure to reduce public spending, increase taxes or double tax rules in the midst of an increase in the Loan Cost of the United Kingdom that eliminated the tax room that Reeves had within its initial budget.
The United Kingdom also faces the spectrum of a temporary increase in the inflation rate, According to the Bank of Englandtogether with Continuing the economic slowness In recent months. The commercial rates of the President of the United States, Donald Trump, are inflationary, who also pull a head for the economy, although the United Kingdom has not yet directed.
Reeves said on Wednesday that the opening of inflation « would have an average of 3.2% this year before falling rapidly to 2.1% by 2026 and fulfilling 2% of the goal of 2027, giving families and companies the security they need and providing our economy the stable platform that needs to grow. »
The treasure had already issued a press release on Tuesday stating that Reeves pledged to cause « national security and renewal » in its spring declaration, which, as he said, would be designed « to start economic growth, protect workers and keep our country safe. »
British Prime Minister Keir Starmer meets with the British Chancellor of Exchequer Rachel Reeves, days before the announcement on the first budget of the new labor government, in Downing Street on October 28, 2024 in London, England. Starmer and Reeves meet ahead of the budget Wednesday.
WPA Pool | Getty Images News | Pictures of getty
The Reeves Declaration was widely expected to address the « erosion of the tax room through a more tight expense control », Emily Nicol and Edward Maling in Daiwa Capital Markets pointed out before Reeves.
« At the time of the October budget announcement, the OBS projected a current budget surplus in the year 29/30 of approximately 10 billion pounds, with this amount represented by the so -called » head « of the Government to reach its current binding objective of a balanced budget on this date. Today’s figures suggest that this has been more than erased, » they said.
« With the economic growth that has recently been below the expectation of the OBS, and the OBS is likely to reduce to half of its GDP forecast of 2.0%and/and by 2025, the overload of the public loan and the reduction of tax revenue in relation to the forecast of Obel could be considered in part due to the cyclic weakness that may be that, in the case, correctly correctly. »
The economists warned, however, that « the increase of about 20-40 basic points in golden returns in much of the curve from mid-October will be considered by the structural open and that with other slides, in the absence of compensation of new policies, it will probably have eroded the head of the government ».
Spent cuts in advance
The erosion of the Treasury Fiscal Hall had promoted the economists and analysts that he announced on Wednesday billions of pounds in cost cuts.
The government had already marked plans Worth of welfare expenses worth 5 billion poundsas well as the intentions to reduce the administrative costs of the civil service, which implements government policies, 15% by 2030.
Rachel Reeves, United Kingdom Finance Minister, speaking in the CNBC Squawk box outside the World Economic Forum in Davos, Switzerland on January 22, 2025.
Gerry Miller | CNBC
« The Declaration of Spring will have an increase in the loans required for the next two years due to higher payments of interest. An updated forecast of Ober will require the chancellor to make cuts of expenses full of around £ 10 Billon to preserve his previous heading room, » the Barclays Moyeen Islam strategist and the main economist in the United Kingdom Jack, which he said last week, was stated last week.
« These savings will most likely focus on healthcare spending and public sector count and will be delayed until the second half of Parliament, beyond 2027, » they added.
Reeves had repeatedly commented that he would not abandon his tax rules or increase taxes for now, although economists expect more taxes by the end of this year.
There was a widespread dismay in the British business community last fall when the tax burden for companies and businessmen with the aim, he said, to connect a hole in public finances and allow investment in public services.
British industry leaders warned it Treasury tax plans However, we could weigh investment, jobs and growth.
Reeves defended the rise of the tax as a « only » measure and necessary to promote investment in public services. He has repeatedly stated that increasing the growth of the United Kingdom is his number 1 priority and promised that he would not let go of the tax rules or the goals he has imposed on his department.
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