Rachel Reeves has admitted she is considering tax rises and spending cuts in the upcoming Budget. The Chancellor said, amid Britain’s dire economic state, that she would not abandon its fiscal rules. This makes tax rises practically inevitable.
Reeves also blamed Brexit and Conservative spending cuts between 2010 and 2019 for stagnating economic growth.
She told Sky News: “I was really clear during the general election campaign – and we discussed this many times – that I would always make sure the numbers add up,” she said.
“Challenges are being thrown our way – whether that is the geopolitical uncertainties, the conflicts around the world, the increased tariffs and barriers to trade. And now this (OBR) review is looking at how productive our economy has been in the past and then projecting that forward.”
And the Chancellor insisted the Government will stick to its fiscal rules.
“I won’t duck those challenges,” she said.
“Of course, we’re looking at tax and spending as well, but the numbers will always add up with me as chancellor because we saw just three years ago what happens when a government, where the Conservatives, lost control of the public finances: inflation and interest rates went through the roof.”
The chancellor said: “Austerity, Brexit, and the ongoing impact of Liz Truss’s mini-budget, all of those things have weighed heavily on the UK economy.
“Already, people thought that the UK economy would be 4% smaller because of Brexit.
“Now, of course, we are undoing some of that damage by the deal that we did with the EU earlier this year on food and farming, goods moving between us and the continent, on energy and electricity trading, on an ambitious youth mobility scheme, but there is no doubting that the impact of Brexit is severe and long-lasting.”
Ms Reeves faced fresh humiliation on Tuesday as Britain’s growth prospects were downgraded and unemployment soared to a four year high.
The under-pressure Chancellor was accused of “killing growth and crushing jobs” after the International Monetary Fund cut its forecast for UK growth next year.
The IMF also warned that prices here are rising even faster than in some developing economies, such as Peru and Senegal.
Britain is now expected to see the highest inflation in the G7 over the next two years, whittling away any growth in household incomes.
It is a major blow to Sir Keir’s pledge to raise living standards in the UK.
Meanwhile, unemployment hit a four-year high and wage growth slowed.
The Chancellor will today (Wed) urge top global firms to invest in the UK at a Washington meeting of the IMF, where she will highlight her commitment to “economic stability”.
But new figures showed the jobless rate increased unexpectedly to 4.8% in the three months to August, up from 4.7%, to reach the highest rate since March 2021.
There are now 1.74 million people unemployed, up from 1.44 million 12 months previously.
Wage growth fell back to 4.7% in the three months to August, down from 4.8% in the previous three months. This is a real terms increase of 0.9% once inflation is taken into account.
