Latest news with #fiscalrules
Bloomberg
4 days ago
- Business
- Bloomberg
Allegra Stratton: Rachel Reeves Finds Herself in Zugzwang
'Contrary to some conventional wisdom, I didn't come into politics because I care passionately about fiscal rules.' So said our chancellor this morning as she, erm, reiterated her commitment to fiscal rules.
The Independent
5 days ago
- Business
- The Independent
Reeves to stick to fiscal rules amid budget wrangles ahead of spending review
Rachel Reeves acknowledged she had been forced to reject calls for funding for 'good' projects as she refused to loosen the rules governing her stewardship of the public finances. The Chancellor has been involved in wrangles with Cabinet colleagues over departmental budgets ahead of next week's spending review. She insisted her self-imposed 'fiscal rules' were 'non-negotiable' because she would not risk the economic chaos that could be caused if the markets lost faith in her ability to control spending. The Chancellor said the combination of tax hikes she has already unveiled and the changes to the way borrowing for investment is accounted for meant £300 billion extra was available over the coming years. But she acknowledged this was not enough to meet the demands made by ministers. She said: 'Not every department will get everything that they want next week and I have had to say no to things that I want to do too.' But, she added: 'That's not because of my fiscal rules. It is a result of 14 years of Conservative maltreatment of our public services, our public realm and of our economy.' She said there were 'good things I've had to say no to' but 'the reason for that is because it is important to have control of the public finances'. Ms Reeves denied she would be forced into mounting another massive tax raid in order to meet her fiscal rules, which include a promise to match day-to-day spending with revenues. She said: 'We made decisions in the budget last year to increase taxes by £40 billion. 'We have absolutely no intention of repeating a budget on that scale again.' And she rejected claims that a squeeze on the Home Office budget – reportedly one of the departments holding off on agreeing a deal with the Treasury – would damage policing. In a letter to the Prime Minister, Sir Mark Rowley, the head of the Metropolitan Police, warned that cuts to police budgets will have 'far-reaching consequences'. Asked about warnings from Sir Mark and other policing leaders, the Chancellor said: 'We will be increasing spending on police in the spending review next week, so that's not a decision or a choice that I would recognise.' Ms Reeves was speaking in Rochdale as she confirmed plans to tear up Treasury Green Book rules to help fund billions of pounds of investment in cities across England. The £15.6 billion package for mayoral authorities included funding to extend the metros in Tyne and Wear, Greater Manchester and the West Midlands, along with a renewed tram network in South Yorkshire and a new mass transit systems in West Yorkshire. Green Book rules have been criticised in some quarters for favouring investment in London and the South East. The move means more money for areas of the North and Midlands, including the so-called red wall, where Labour MPs face an electoral challenge from Reform UK. Ms Reeves said: 'The choice is already clear: Where Reform and the Conservatives would gamble with Britain's future, Labour will invest in that future. 'Where they offer chaos, Labour offers stability. 'Where they offer decline, Labour offers investment. 'And where they offer more of the same, we offer change; change that we can now deliver because of the choices we have made.' The investment announced on Wednesday includes £2.4 billion for the West Midlands to fund an extension of the region's metro from Birmingham city centre to the new sports quarter, and £2.1 billion to start building West Yorkshire Mass Transit by 2028. Greater Manchester will receive £2.5 billion for projects including new tram stops in Bury, Manchester and Oldham and an extension of the tram network to Stockport. A £1.5 billion investment in South Yorkshire will include £530 million to renew the region's trams, while the East Midlands will receive £2 billion to design a new mass transit system between Derby and Nottingham. In the south, the west of England will receive £800 million, including £200 million to develop mass transit links between Bristol, Bath, South Gloucestershire and north Somerset. Shadow Treasury minister Gareth Davies said the transport plans were repeats of promises made by the previous Conservative administration. He said: 'Rachel Reeves is scrambling to salvage her failing economic plan after the Prime Minister has made U-turn after U-turn, punching holes in her credibility. 'She needed to do better than copying and pasting announcements made by the previous Conservative government. The country is not falling for their lies anymore. Britain deserves better.'
Times
26-05-2025
- Business
- Times
Welfare U-turns may jeopardise Rachel Reeves's fiscal rules
Rachel Reeves's 'iron-clad' fiscal rules will be 'touch and go' if the government restores winter fuel payments for pensioners and scraps the two-child limit for benefit claims, economists have warned. Sir Keir Starmer is open to scrapping the two-child benefit in the autumn amid a mounting rebellion over welfare cuts, a move which would cost about £3.5 billion. The prime minister has also committed the government to a partial U-turn on reinstating winter fuel payments for pensions, which could cost £1.5 billion. The chancellor is already facing a shortfall of about £60 billion in the public finances because of anaemic levels of economic growth and the rising cost of government borrowing.
Daily Mail
10-05-2025
- Business
- Daily Mail
IMF to probe Chancellor's handling of economy
Labour's economic strategy will face its biggest independent test this week with the arrival of an inspection team from the International Monetary Fund. The annual 'Article 4' examination – a health check by the IMF on member nations' economies – is due to begin tomorrow. It is expected to focus on Rachel Reeves' fiscal rules and whether they are sufficiently robust to keep Britain's soaring borrowing and debt under control. The Chancellor is engaged in an epic struggle to meet her pledge that day-to-day spending is fully funded by taxation. The IMF visit will be the first since Labour took office in July and a chance to look in detail at its Budget and growth strategy. Inspectors are said to be planning a visit to Cambridge, the heart of Britain's vibrant tech and life sciences innovation community. The Government has made much of the UK's role as a technological powerhouse that aims to rival Silicon Valley. But it has prioritised funding for the public sector and green projects ahead of research and development and tax breaks for entrepreneurship. The IMF inspectors will take a special interest in Britain's dysfunctional jobs market. The UK is unusual in having a population of 9.2 million working aged people who are 'economically inactive' – for various reasons absent from the labour market and not seeking work. The figure has soared by 700,000 since the pandemic. Many are claiming sickness benefits, with mental health a big factor. Keir Starmer's Government is seeking to address the issue by axing £5 billion of Personal Independence Payments (PIPs) and universal credit and improving paths back into the workforce. The IMF is understood to have been conducting a large research study into economic inactivity in Spain and the UK, the two developed economies which have the biggest problem in this area. Tax and spending watchdog the Office for Budget Responsibility has identified soaring health payments and the loss of tax revenues from people not working as one of the biggest threats to long-term financial stability. The IMF is understood to be broadly supportive of Reeves' £40 billion tax-raising Budget in October and the Government's focus on public sector investment. But there is concern that the Chancellor left herself insufficient 'headroom' to meet its current spending target. In her March spring statement Reeves was forced into finding new spending cuts and revenues to restore the £11billion of headroom she had allowed herself, which had been wiped out by stalling growth. This was partly caused by the sharp impact of the rise in National Insurance contributions on confidence and private sector investment. Higher than forecast interest payments on the national debt are another headache. These have climbed due to erratic White House decision-making. Among the biggest problems for Reeves are the many downgrades of forecasts for growth. So far she has largely sought to deal with the hole in her Budget by making spending cuts. The results will be seen on June 11 when she is due to unveil a multi-year spending settlement. The Chancellor faces increasing unrest among Labour's backbenchers over her early decision to axe the winter fuel allowance for pensioners and the party's assault on health benefits. The IMF could recommend the pain is spread by further revenue-raising. That would be hard for the Chancellor, who has vowed she would not come back for more taxes. The IMF slashed its growth forecast for the UK in April. Most big forecasters now expect the economy to grow at 1 per cent in this calendar year. The Bank of England fears growth will be hit by trade disruption caused by Trump's tariff wars and higher than expected inflation. Its latest forecast shows a downgrade from 1.5 to 1.25 per cent in 2026. The IMF team will spend some time with the Bank of England. It is generally supportive of the transparent way in which the Bank accounts for the losses of its quantitative easing programme, a legacy of the 2008 financial crisis and Covid. The cost is passed on to the Treasury, adding to the deficit. Other central banks have chosen to absorb losses from bond buying on their own balance sheet. The inspection is due to end with a press conference towards the end of this month.
