The upcoming 12 weeks are significant for the Chancellor, the government, and the broader economy as preparations for the Budget process begin. Rachel Reeves launched this process at a Birmingham housing development, where she participated in bricklaying activities. Alongside this symbolic gesture, the Chancellor emphasized her intention to go beyond merely securing funds for public services, an action often associated with tax increases. Instead, she aims to implement structural reforms in the tax system to enhance economic productivity and living standards.
A key aspect of Reeves’ approach is establishing her authority in the Budget process, declaring, “I will make the decisions,” in alignment with Number 10. This statement comes amidst recent transitions within government ranks, where the Treasury has seen personnel changes, including her former deputy, Darren Jones, taking on a newly created role as Chief Secretary to the Prime Minister.
Reeves faces the immediate challenge of addressing concerns about the public finances, particularly discussions around a potential “£50bn black hole” and speculation regarding a bailout request from the International Monetary Fund. She dismissed these claims and criticized discussions about tax increases on property, banks, and pensions as misleading and irresponsible. The Treasury maintains that it has not been engaging in speculative discussions over the summer.
Additionally, Reeves responded to comments from the Office for Budget Responsibility (OBR), which noted that government promises regarding tax and spending have often gone unfulfilled. Despite her support for the OBR’s independence, tensions may arise between her administration and the office regarding economic assessments. As she adheres to fiscal rules surrounding borrowing, there may be pressure from backbenchers for adjustments, including potential welfare cuts. With inflation currently at 3.8%, achieving the Budget’s objectives while managing internal political dynamics may present additional challenges as the November 26 deadline approaches.
Source: https://www.bbc.com/news/articles/cn76ly476x6o?at_medium=RSS&at_campaign=rss