What economic levers are left for Reeves to pull?
The borrowing rules stipulate that day-to-day government costs will be paid for by tax income, rather than borrowing and debt should be falling as a share of national income by the end of this parliament in 2029-30.Niesr does not recommend changing the new borrowing rules, which have only just been established, at this stage. The International Monetary Fund (IMF) and others have floated the idea that the Treasury should only really make Budget changes once a year to stop the uncertainty. The IMF also suggested bigger buffers as the best idea.All this matters because it could mean that earlier estimates of a need to bridge a budget gap of £15-20bn a year with tax rises or spending cuts in the autumn, are a material underestimate. Niesr's forecast of a £40-50bn gap is on the pessimistic side, and there are still many moving parts before the Autumn, but it does show that the scale of the challenge is not easing for the chancellor.With most spending now fixed, and political challenges over welfare cuts, that would leave tax rises as the main lever.While the government promised not to change the main rates of tax, Niesr points to scope to further raise revenue through changes to the scope of VAT, pensions allowances, council tax and prolonging the freeze in income tax thresholds. If Niesr are right, it could be all of the above.Of course, economic news has been mixed in recent weeks. We'll get further information on Thursday when the Bank of England is set to decide on a further interest rate cut and issue its new economic forecasts. And next week, the important GDP figures for the second quarter are due to be released and they're expected to show the UK is no longer the fastest growing economy of the major G7 economies.
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23 minutes ago
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Telegraph
24 minutes ago
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Reuters
24 minutes ago
- Reuters
Bank of England sees bigger QT impact on gilt yields
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