Latest news with #publicborrowing
Zawya
3 days ago
- Business
- Zawya
UK finance minister nominates budget watchdog chief for second term
British finance minister Rachel Reeves said on Friday that she had nominated the chair of the Office for Budget Responsibility Richard Hughes to serve a second five-year term. The OBR prepares twice yearly forecasts of British economic growth and public borrowing and assesses whether Reeves is on track to meet her budget goals. Hughes' reappointment is subject to approval by the House of Commons' Treasury Committee. (Reporting by David Milliken; editing by Suban Abdulla)
Reuters
3 days ago
- Business
- Reuters
UK finance minister nominates budget watchdog chief for second term
LONDON, May 30 (Reuters) - British finance minister Rachel Reeves said on Friday that she had nominated the chair of the Office for Budget Responsibility Richard Hughes to serve a second five-year term. The OBR prepares twice yearly forecasts of British economic growth and public borrowing and assesses whether Reeves is on track to meet her budget goals. Hughes' reappointment is subject to approval by the House of Commons' Treasury Committee.
Zawya
6 days ago
- Business
- Zawya
IMF nudges up UK's 2025 growth forecast, sees 'significant risks' to deficit goals
The International Monetary Fund nudged up its growth forecast for Britain this year in a regular assessment of the country's economy, and it urged finance minister Rachel Reeves to stick to her plans to lower public borrowing. Growth this year is now forecast to come to 1.2%, marginally higher than the 1.1% it predicted in April, before rising to 1.4% in 2026, despite headwinds from U.S. tariffs that are pencilled in to lop 0.3% off annual output. "These revisions reflect the strong GDP performance in the first quarter, reflecting the resilience of the UK economy despite the complex external environment," Luc Eyraud, the IMF's mission chief to the United Kingdom, told reporters in London. The IMF said the stronger growth in 2026 - which was the same as it forecast in April - reflected the prospect of lower Bank of England interest rates, higher asset and property prices and stronger consumption, as well as greater public spending announced by Reeves in her October budget. The Fund expects the BoE to cut interest rates by a quarter of a percentage point once a quarter until they reach a level of around 3%, down from 4.25% currently, Eyraud said. Reeves welcomed the growth upgrade and highlighted that Britain's growth in the first quarter of this year was the fastest among the world's seven largest rich nations. However, the Fund warned that she had no room to deviate from her goals to balance day-to-day spending with tax revenue by 2029/30, which have been made increasingly challenging by a rise in global borrowing that have hit Britain hard. "We think it's very important, in this context ... that the authorities stay the course and stick to their objective of reducing the fiscal deficit gradually over the medium term as outlined at the time of the October budget," Eyraud said. The IMF said it saw "significant risks to the successful implementation of the fiscal strategy, from the high level of global uncertainty, volatile financial market conditions, and the challenge of containing day-to-day spending." Reeves is due to set out budgets for individual government departments for the next three years in a spending review on June 11, after the overall total was outlined in October. She will also have to find extra money at an annual budget in the autumn after Prime Minister Keir Starmer last week said the government would partially reverse her removal of energy subsidies for pensioners. The IMF also proposed that Britain's budget watchdog should place less emphasis on a cash figure for the amount of headroom that Reeves has to meet her target which is closely watched by markets, and only publish it once a year rather than twice. "It needs to be de-emphasised," Eyraud said. "This is not a number that translates into immediate short-term fiscal space or lack of fiscal space." (Reporting by David Milliken; Editing by Hugh Lawson)
Reuters
6 days ago
- Business
- Reuters
IMF nudges up UK's 2025 growth forecast, sees 'significant risks' to deficit goals
LONDON, May 27 (Reuters) - The International Monetary Fund nudged up its growth forecast for Britain this year in a regular assessment of the country's economy, and it urged finance minister Rachel Reeves to stick to her plans to lower public borrowing. Growth this year is now forecast to come to 1.2%, marginally higher than the 1.1% it predicted in April, before rising to 1.4% in 2026, despite headwinds from U.S. tariffs that are pencilled in to lop 0.3% off annual output. "These revisions reflect the strong GDP performance in the first quarter, reflecting the resilience of the UK economy despite the complex external environment," Luc Eyraud, the IMF's mission chief to the United Kingdom, told reporters in London. The IMF said the stronger growth in 2026 - which was the same as it forecast in April - reflected the prospect of lower Bank of England interest rates, higher asset and property prices and stronger consumption, as well as greater public spending announced by Reeves in her October budget. The Fund expects the BoE to cut interest rates by a quarter of a percentage point once a quarter until they reach a level of around 3%, down from 4.25% currently, Eyraud said. Reeves welcomed the growth upgrade and highlighted that Britain's growth in the first quarter of this year was the fastest among the world's seven largest rich nations. However, the Fund warned that she had no room to deviate from her goals to balance day-to-day spending with tax revenue by 2029/30, which have been made increasingly challenging by a rise in global borrowing that have hit Britain hard. "We think it's very important, in this context ... that the authorities stay the course and stick to their objective of reducing the fiscal deficit gradually over the medium term as outlined at the time of the October budget," Eyraud said. The IMF said it saw "significant risks to the successful implementation of the fiscal strategy, from the high level of global uncertainty, volatile financial market conditions, and the challenge of containing day-to-day spending." Reeves is due to set out budgets for individual government departments for the next three years in a spending review on June 11, after the overall total was outlined in October. She will also have to find extra money at an annual budget in the autumn after Prime Minister Keir Starmer last week said the government would partially reverse her removal of energy subsidies for pensioners. The IMF also proposed that Britain's budget watchdog should place less emphasis on a cash figure for the amount of headroom that Reeves has to meet her target which is closely watched by markets, and only publish it once a year rather than twice. "It needs to be de-emphasised," Eyraud said. "This is not a number that translates into immediate short-term fiscal space or lack of fiscal space."
The Guardian
22-05-2025
- Business
- The Guardian
Jump in UK borrowing shows Rachel Reeves needs to relax her strict budget rules
There is mounting pressure on Rachel Reeves to relax her budget rules and to prepare the ground by telling voters in the next few weeks. The latest public borrowing figures for April, which show a rise above most City forecasts, indicate that the chancellor will struggle to stay within the constraints she imposed on herself at last year's budget. Reeves gambled that the Treasury could brazen out a difficult year with nearly £10bn of headroom – a cushion that would protect the government against all eventualities. Donald Trump's tariffs war and the subsequent global slowdown have been enough to derail that tactic. Economic growth is expected to slow over the next year despite a spate of trade deals. Inflation is rising, hitting household incomes and pushing up the costs of public services. A £10bn cushion over a five-year time horizon was always optimistic. Now it looks like being in jeopardy even after the Office for National Statistics said revisions of past estimates means it overestimated last year's debt by £4bn. No 10 is adding to Reeves's problems now Keir Starmer has made clear he views the winter fuel allowance cut as a mistake. It's possible he has many other unpopular measures in his sights. There was better news from a rise in tax receipts linked to the increase in employer national insurance contributions and the freeze on income tax thresholds, which has brought more people into higher rates of tax. They gave the Treasury a lift, according to April's figures, but not enough to override the extra spending needed to compensate public bodies for higher wage bills and the costs of inflation on department running costs. Next month's departmental spending review will set aside funds for lots of long-term projects designed to raise the UK's skill levels, bring more people back into the workforce and boost productivity. As a potential reboot, it holds the prospect of lifting the nation's spirits. The impact, though, will be circumscribed by the need to keep the overall plan within tight spending limits. Another problem for Reeves can be found in the reaction from businesses. They are making their own assessment of the public finances and the tension between the people-pleasing Starmer and the iron chancellor. They know more concessions from No 10 will make the likelihood of higher taxes on business more likely in the autumn. If there is a budget gap to fill, company bosses sense they are being viewed as a cash cow that can be endlessly milked. Their reaction is already clear; apart from a few industries such as construction, where the government has shown a sense of direction, most businesses are hunkering down, laying off staff and cancelling job adverts. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Yet the Treasury knows that another round of tax rises, whether on businesses or households, will be a growth killer, delaying a move through the economic gears promised when Labour took office. The National Institute of Economic and Social Research has long argued that constraining budget rules have forced successive chancellors to make bad, short-term decisions in an effort to squeeze through each annual budget. That is the prospect Reeves faces now. The thinktank favours bringing down debt, but after a period of public investment has sparked a rise in tax receipts. It also argues, like many do, that cuts to welfare at this moment will prove to be counter-productive. To maintain investment and keep public services from falling backwards, there will need to be more cash on the table from the Treasury. That's the growing view in the business community as well. The public wants the economy to recover more than it wants fiscal rectitude, and while the financial markets are anxious about rising public debts, the scale of the modest easing needed in the UK will be dwarfed by what is going on in the US, where Trump is pushing for tax cuts that raise US debt levels by more than $5tn by the end of the decade. As messages go, there could not be a clearer one for the chancellor. A relaxation of the fiscal rules should not be delayed. Without it, the whole Labour project could be undermined.
