Latest news with #OfficeofBudget
The Herald Scotland
5 days ago
- Business
- The Herald Scotland
Reeves says rulings on tax must wait for Budget amid inheritance tax speculation
Earlier this week, the Guardian reported that officials are examining whether tightening rules around the gifting of assets and money could help address the UK's multi-billion-pound fiscal shortfall. Government U-turns over winter fuel payments and welfare reform have left Chancellor Rachel Reeves with a multibillion-pound spending gap to about the reports on Thursday, Ms Reeves said: 'Any decision around taxation is a … decision for the Budget, and I'll make those announcements. 'We haven't even set the date yet for the Budget, but the key focus of the Budget is going to be to build on numbers that we've seen today to boost productivity and growth and prosperity all across the country. 'That is my number one priority as Chancellor, to get our economy firing off all cylinders so that working people in all parts of the country will feel the benefits of that economic growth.' Pushed on whether taxes will have to increase in the autumn, Ms Reeves added: 'We'll wait for the official forecast from the Office of Budget Responsibility, and we'll make those decisions in the round.' Chancellor of the Exchequer Rachel Reeves said decisions on taxes, including inheritance tax, will have to wait for the autumn Budget (Matthew Hornwood/PA) Among the reported inheritance tax measures under consideration is a potential cap on lifetime gifts, part of a broader review into how assets can be transferred before death to minimise inheritance tax liabilities. Under current UK rules, gifts made more than seven years before a person's death are exempt from inheritance tax. Gifts made between three and seven years prior are taxed on a sliding scale, depending on their value and the total estate. The Chancellor was speaking as new official figures show that the UK economy slowed in the second quarter of this year amid pressure from tariff uncertainty and tax increases. The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.3% for the quarter after 0.7% growth in the first three months of the year. However, the figure was stronger than the 0.1% level widely expected by economists after an uptick in activity in June and revised data for earlier in the quarter.
The Independent
26-03-2025
- Business
- The Independent
Trump announces 25% tariffs on vehicle imports in fresh blow to Reeves
Donald Trump has announced 25 per cent tariffs on all motor vehicle imports to the United States, in a move that will inflict another blow on the UK economy. During a press conference in the Oval Office, the US president announced that cars and light trucks imported into the US would be subject to the levy in the latest escalation of the Trump administration's far-reaching trade war. 'What we're going to be doing is a 25% tariff for all cars that are not made in the United States,' Trump said. The announcement raises fears of greater economic pain in the UK, whose largest vehicle export market is the US, having exported £6.4bn in motor vehicles to the United States in 2023, according to the Office of National Statistics. It comes after the Office of Budget Responsibility halved the UK's economic growth forecast from 2 per cent during a day in which chancellor Rachel Reeves announced sweeping cuts to benefits to rein in the budget and boost defence spending. The OBR earlier warned tariffs threatened by Trump could could eliminate all of Ms Reeves' margin of error in her budget if they are implemented. Talks between the UK and US on avoiding tariffs remain ongoing, but measures could amount to 20 per cent on British goods and come into effect next week. In its economic forecast published on Wednesday, the OBR said the most 'severe' scenario, in which the UK and other nations retaliated to the imposition of tariffs, would see GDP 0.6 per cent lower than forecast this year and 1 per cent lower next year. This scenario would also 'almost entirely eliminate' the Chancellor's £9.9 billion headroom against her fiscal rules, potentially forcing her to implement further spending cuts or tax rises.
Yahoo
26-03-2025
- Business
- Yahoo
Rachel Reeves claims families will now be £500 better off. Here's what experts say
In her Spring Statement, Rachel Reeves promised that the average household would be 'over £500 a year better off' under Labour – even after inflation. For millions feeling the pinch, it was a headline moment. As a positive, it was one for the chancellor to hang her hat on - though pales in comparison to 250,000 being sent into poverty by other cuts to the welfare bill. But how real is that £500? Is it money in your pocket, or just clever forecasting? Within minutes, the message had already started to shift – and the fine print tells a very different story. The first question is easy to answer in part: given the data was from the Office of Budget Responsibility (OBR), it should be trusted to have been arrived at in diligent fashion, factoring in the latest economic data to give Ms Reeves the headline that household disposable income was growing 'at almost twice the rate' as had been forecast last year. However, there may have already been some revisionism on that within minutes - and the lack of clarity and consistency is arguably as concerning as any quickfire change - with Labour posting to social media that average households would be £500 better off in the final year of parliament, not each year. But the second part of the question is arguably more real for those families she's talking about - and, sadly, it probably isn't one they'll be delighted by. It is not, of course, as though it means £500 is suddenly deposited in bank accounts or pockets. Some have even interpreted those words as being £500 better off across the entire course of parliament, with Martin Lewis of surmising on social media from OBS notes that the sum is generated 'over the life of parliament not per year.' 'Most of it comes in the last two years, after [it] drops first, and is based on assumptions that some current tax proposals eg. freezing tax thresholds will end,' he continued. Economics experts are largely in agreement and even suggested the sums meant a more modest improvement of the national economy over the mid-term than Ms Reeves and co had initially been forecasting. 'This is hardly ground breaking and I'm not sure anyone will or should be celebrating this modest increase,' Blick Rotherberg CEO Nimesh Shah told The Independent. 'This, in itself, suggests that the economy is not going to grow to anywhere near the extent that Labour were promising when they came into government and the policies aren't working – despite Rachel Reeves suggesting otherwise at the start of her Spring Statement. 'Households being £500 a year better off [over the full term] is less than £2 per week. But sticky inflation will wipe that out with some ease. 'When inflation remains high, interest rates aren't coming down as quickly as expected and the economic growth has been halved, £500 in five years (an awfully long time away) doesn't touch the sides and I don't expect provides any encouragement.' As to exactly where that increase in money comes from, the outlook is uncertain - and it is a lower real income rise than families have seen previously too, says Oxford Economics analyst Michael Saunders. 'The rise in real incomes per household comes from pay growth running slightly ahead of inflation, in the OBR's forecast,' he told The Independent. 'As to whether it matters: to put it in context, real disposable income per head in 2024 Q3 (the latest available data) was just 1.0 per cent above the 2019 level. 'We don't know what the per cent rise implied by the £500 is, but the OBR expect real disposable income per head to rise by 3.2 per cent from the end of 2024 to the start of 2031. 'Will people notice this faster income? Perhaps, but its not going to transform things. From 1997 to 2007, real income rose by 27 per cent, so the OBR's outlook is pretty low compared to that.' Sign in to access your portfolio
The Independent
26-03-2025
- Business
- The Independent
Rachel Reeves claims families will now be £500 better off. Here's what experts say
In her Spring Statement, Rachel Reeves promised that the average household would be 'over £500 a year better off' under Labour – even after inflation. For millions feeling the pinch, it was a headline moment. As a positive, it was one for the chancellor to hang her hat on - though pales in comparison to 250,000 being sent into poverty by other cuts to the welfare bill. But how real is that £500? Is it money in your pocket, or just clever forecasting? Within minutes, the message had already started to shift – and the fine print tells a very different story. The first question is easy to answer in part: given the data was from the Office of Budget Responsibility (OBR), it should be trusted to have been arrived at in diligent fashion, factoring in the latest economic data to give Ms Reeves the headline that household disposable income was growing 'at almost twice the rate' as had been forecast last year. However, there may have already been some revisionism on that within minutes - and the lack of clarity and consistency is arguably as concerning as any quickfire change - with Labour posting to social media that average households would be £500 better off in the final year of parliament, not each year. But the second part of the question is arguably more real for those families she's talking about - and, sadly, it probably isn't one they'll be delighted by. It is not, of course, as though it means £500 is suddenly deposited in bank accounts or pockets. Some have even interpreted those words as being £500 better off across the entire course of parliament, with Martin Lewis of surmising on social media from OBS notes that the sum is generated 'over the life of parliament not per year.' 'Most of it comes in the last two years, after [it] drops first, and is based on assumptions that some current tax proposals eg. freezing tax thresholds will end,' he continued. Economics experts are largely in agreement and even suggested the sums meant a more modest improvement of the national economy over the mid-term than Ms Reeves and co had initially been forecasting. 'This is hardly ground breaking and I'm not sure anyone will or should be celebrating this modest increase,' Blick Rotherberg CEO Nimesh Shah told The Independent. 'This, in itself, suggests that the economy is not going to grow to anywhere near the extent that Labour were promising when they came into government and the policies aren't working – despite Rachel Reeves suggesting otherwise at the start of her Spring Statement. 'Households being £500 a year better off [over the full term] is less than £2 per week. But sticky inflation will wipe that out with some ease. 'When inflation remains high, interest rates aren't coming down as quickly as expected and the economic growth has been halved, £500 in five years (an awfully long time away) doesn't touch the sides and I don't expect provides any encouragement.' As to exactly where that increase in money comes from, the outlook is uncertain - and it is a lower real income rise than families have seen previously too, says Oxford Economics analyst Michael Saunders. 'The rise in real incomes per household comes from pay growth running slightly ahead of inflation, in the OBR's forecast,' he told The Independent. 'As to whether it matters: to put it in context, real disposable income per head in 2024 Q3 (the latest available data) was just 1.0 per cent above the 2019 level. 'We don't know what the per cent rise implied by the £500 is, but the OBR expect real disposable income per head to rise by 3.2 per cent from the end of 2024 to the start of 2031. 'Will people notice this faster income? Perhaps, but its not going to transform things. From 1997 to 2007, real income rose by 27 per cent, so the OBR's outlook is pretty low compared to that.'
Sky News
26-03-2025
- Business
- Sky News
Nervousness in Labour about how spring statement might land - and there could be worse to come
Rachel Reeves will keep her remarks short when she delivers the spring statement today. But the enormity of what she is saying will be lost on no one as the chancellor sets out the grim reality of the country's finances. Her economic update to the House of Commons will reveal a deteriorating economic outlook and rising borrowing costs, which has forced her to find spending cuts, which she's left others to carry the can for (more on that in a bit). The independent Office of Budget Responsibility (OBR) is expected to forecast that growth for 2025 has halved from 2% to 1%. That, combined with rising debt repayment costs on government borrowing, has left the chancellor with a black hole in the public finances against the forecasts published at the budget in October. Back then, Reeves had a £9.9bn cushion against her "iron-clad" fiscal rule that day-to-day spending must be funded through tax receipts not debt by 2029-30. But that surplus has been wiped out in the ensuing six months - now she finds herself about £4bn in the red, according to those familiar with the forecasts. That's really uncomfortable for a chancellor who just months ago executed the biggest tax and spend budget in a generation with the promise that she would get the economy growing again. At the first progress check, she looks to be failing and has been forced into finding spending cuts to make up the shortfall after ruling out her other two options - further tax rises or more borrowing via a loosening of her self-imposed fiscal rules. 7:26 'World has changed' When Reeves gets up on Wednesday, she will put it differently, saying the "world has changed" and all that means is the government must move "further and faster" to deliver the reforms that will drive growth. But her opponents will be quick to lay economic woes at her door, arguing that the unexpected £25bn tax hike on employers' national insurance contributions last October have choked off growth. But it's not just opposition from the Conservative benches that the chancellor is facing - it is opposition from within as she sets about cutting government spending to the tune of £15bn to fill that black hole. Politically, her allies know how awkward it would have been for the chancellor to announce £5bn in welfare cuts to avoid breaking her own fiscal rules, with one acknowledging that those cuts had to be kept separate from the spring statement. There's also expected to be more than £5bn of extra cuts from public spending in the forecast period, which could see departments that don't have protected budgets - education, justice, home - face real-term spending cuts by the end of the decade. Not an emergency budget We won't see the detail of that until the Spending Review in June. This is not an emergency budget because the chancellor isn't embarking on a round of tax raising to fix the public finances. But these are, however they are framed, emergency spending cuts designed to plug her black hole and that is politically difficult for a government that has promised no return to austerity if some parts of the public sector face deep cuts to stick with fiscal rules. If that's the macro picture, what about the "everyday economics" of peoples' lives? I'd point out two things here. On Wednesday, we will get to see where those £5bn of welfare cuts will fall as the government publishes the impact assessment that it held back last week. Up to a million people could be affected by cuts, and the reality of who will be hit will pile on the pressure for Labour MPs already uncomfortable with cuts to health and disability benefits. 3:06 The second point is whether the government remains on course to deliver its key pledge to "put more money in the pockets of working people" during this parliament after the Joseph Rowntree Foundation think-tank produced analysis over the weekend saying living standards for all UK families are set to fall by 2030. The chancellor told my colleague Trevor Phillips on Sunday that she "rejects" the analysis that the average family could be £1,400 worse off by 2030. But that doesn't mean that the forecasts published on Wednesday calculating real household disposable income per head won't make for grim reading as the economic outlook deteriorates. Nervousness in Labour Ask around the party, and there is obvious nervousness about how this might land, with a degree of anxiety about the economic outlook and what that has in store for departmental budgets. But there is recognition too from many MPs that the government has political space afforded by that whopping majority, to make these decisions on spending cuts without too much fallout - for now. Because while Wednesday will be bad, worse could be yet to come. Staring down the barrel The chancellor is staring down the barrel of a possible global trade war that will only serve to create more economic uncertainty, even if the UK is spared from the worst tariffs by President Donald Trump. The national insurance hike is also set to kick in next month, with employers across the piece sounding the warnings around investment, jobs and growth. Six months ago, Reeves said she wouldn't be coming back for more after she announced £40bn in tax rises in that massive first budget. Six months on she is coming back for more, this time in the form of spending cuts. And in six months' time, she may well have to come back for more in the form of tax rises or deeper cuts. The spring statement was meant to be a run-of-the-mill economic update, but it has morphed into much more. The chancellor now has to make the hard sell from a very hard place, that could soon become even tougher still.
