Chancellor Rachel Reeves stood accused of losing control of the economy today as she desperately cut spending further despite record tax rises to cover a £14 billion black hole largely of her own making. The Mail has more.
Rachel Reeves laid out a fresh wave of spending cuts to offset stalling growth today as she battles to balance the Government’s books.
The Chancellor stressed the grim realities facing the country as she delivered her Spring Statement to the Commons, arguing the “world has changed”.
She said she was “proud” of her track record despite having a £14 billion black hole in the finances to fill, after her huge tax-and-spend Autumn Budget was followed by an economic slowdown.
However, she admitted the OBR watchdog has slashed growth forecasts in half, to just 1% this year. It expects inflation to average 3.2% this year, instead of the 2.5% it anticipated in October, and progress on productivity will be lower.
The tax burden is still on track to hit a record high of 37.7% of GDP in 2027-28, from 35.3% this year, with frozen thresholds inflicting more pain on Brits.
The unemployment rate is seen as peaking at 4.5% this year, 160,000 higher than predicted before. After growing by 1.4% in 2025, real earnings are set to stagnate in 2026 and 2027, before struggling to a 0.5% improvement in 2029.
Worryingly, the OBR cautioned that even that sluggish performance could easily be derailed by Donald Trump’s trade war or failure to secure productivity advances in the public sector. And the respected IFS think-tank said the plans were so tight that more tax rises would potentially be needed in the Autumn.
The stormy picture had put Ms Reeves on track to break her own ‘fiscal rules’ before she scrambled to make up the shortfall – saying it would be from spending cuts instead of even more tax rises at this stage.
Meanwhile, Ms Reeves confirmed she had suffered another major setback with the OBR rejecting the previously-claimed £5 billion of savings from benefits reforms.
Instead they have been valued at more like £3 billion – sparking a frantic last-ditch effort to find more cuts despite mounting fury from Labour MPs. Another £400 million is apparently being trimmed from welfare, taking the final expected savings to £3.4 billion.
The bungled process triggered an extraordinary blame game, with claims late tweaks meant the proposals were not given to the OBR in time before they were laid out to the Commons by Liz Kendall last week. …
More than half of voters think Labour is spending too much time blaming the Tories. Some 31% now blame Labour for Britain’s growth crisis, compared with 27% blaming the Conservatives and 18% citing global events.
Worth reading in full.
Let’s not forget that the economy was ‘going gangbusters’ with the fastest growth rate in the G7 when the Tories left power and that the much-vaunted ‘£22 billion black hole’ in the public finances was clarified by the OBR to be just £9.5 billion – smaller than the black hole Reeves has basically made for herself with her own economically illiterate interventions.
Perhaps Rachel from Accounts would be better suited to the complaints department than running a major economy?
Stop Press: Andrew Griffiths has spotted an “unexploded bombshell” in today’s OBR report: “The 300 pages of job-destroying Employment Rights Bill has NOT been reflected in today’s forecasts.”
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