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Chancellor Rachel Reeves will not raise taxes in next week’s spring statement, work officials said, as they tried to reject conservative claims that it is preparing an “emergency budget”.
Instead, Reeves will turn to the reduction of public spending – a combination of welfare cuts and savings in the planned budgets of Whitehall Departments – to rebuild the right heading room against its fiscal rules.
Reeves’ allies said she was determined to secure the financial markets by maintaining a “reasonable” amount of the head room. “The markets are looking at us carefully,” one said.
Higher costs of borrowing and slow growth are expected to have deleted the majority or all 9.9bn of the head chamber that the UK fiscal supervisor said Reeves had at the time of its budget in October.
Government officials opposed the suggestions that Reeves would try to significantly increase that pillow – an action that would need greater costs of spending from what was currently expected.
“We want a buffer but we’re not playing a game with numbers,” one said. The Reeves fiscal rule stipulates that current expenses must match tax bills by 2029-30.
We have Badeno, conservative leader, claimed in the Municipal House on Wednesday that Reeves’ fiscal plans were so weak that she was forced to hold “an emergency budget next week”.
But labor officials said Wednesday’s spring statement will not have tax increases and any fiscal measures will be announced in a fall budget.
“You make a tax on a major fiscal event – that’s not one,” said a reeves’ assistant, referring to the spring statement.
The Chancellor has already identified several savings to rebuild her head room, including £ 5 billion of welfare cuts announced by Liz Kendall, the secretary of labor and pensions on Tuesday.
Moreover, the government’s decision to relocate part of its budget of development overseas in defense, to increase military spending to 2.5 percent of GDP by 2027, will give the Chancellor additional flexibility.
This is because some protection expenses are categorized as an investment, which is exempt from the Reeves budget rule.
She will use the statement to detect a fresh crush on the department’s expenses from 2026-27, according to people informed about her plans.
This time limit includes the period of the future review of the expenditure government, whose results will be announced in June, as well as the last year of Parliament.
The division of annual growth of real terms in the daily expenses of departments in about 1.1 percent from 2026-27, compared to an average rate of 1.3 percent planned in the October budget, can save billions of pounds.
The Institute for Fiscal Studies, an opinion, estimates that a rate of increased costs of real terms of about 1.1 percent would save £ 5 billion per year, based on the Office for Budget Responsibility in October Predicting October inflation.
Some economists have criticized Reeves for not creating a greater amount of head room than 9.9bn £ estimated by OBR last October.
That buffer was the third smaller of the 28 forecasts made by OBR since it was created in 2010.
