Chancellor Rachel Reeves has been warned by official forecasters that she is on course to break her own ‘fiddled’ Budget rules – paving the way for spending cuts or more tax rises.
It was reported yesterday that the Office for Budget Responsibility (OBR) has downgraded its UK growth outlook, resulting in the loss of nearly £10 billion in ‘headroom’.
In a fresh blow to the Chancellor’s flailing growth initiatives, official figures are predicted to show today that the UK is on the verge of recession.
The OBR has given preliminary projections to Ms Reeves ahead of its update on the economy on March 26.
Sources told Bloomberg News they would show the Chancellor breaking the ‘stability rule’ she introduced in October.
The rule states that within three years, daily government expenditures must be equal to tax revenues.
At the time of the Budget in October, OBR forecasts showed Ms Reeves had £9.9 billion in so-called ‘headroom’ – money the Government can use to spend more or slash taxes without breaking its fiscal rules.
However, as the cost of borrowing money on the financial markets has increased and the growth prospects have deteriorated significantly, the Chancellor is now facing a slight deficit.
To balance the books, Ms. Reeves will probably need to reduce spending or raise taxes once more.
Tory business spokesman Andrew Griffith said: ‘It takes particular ineptitude to fiddle your own fiscal rules, having pledged not to, and then miss even these looser ones. Who pays the price? Small businesses, any entrepreneurs still left in the UK – and everyone’s children and grandchildren.’
OBR declined to comment on the preliminary evaluation, but last night, the Treasury was scheduled to begin an investigation into leaks.
Ms Reeves would have no financial headroom, according to a prediction made yesterday by the National Institute of Economic and Social Research.
Gross domestic product figures published today by the Office for National Statistics are expected to show the economy shrank by 0.1 percent in the fourth quarter. Two-quarters of shrinkage in a row would mean the UK was in recession.
Labour came into office last July promising to concentrate on growth, but the economy has stagnated.
Ms Reeves’s £40 billion tax-raising Budget saw confidence crumble further. It included a £25 billion raid on employer national insurance that firms warn will hit jobs and investment and increase prices.
Last week, the Bank of England slashed its growth perspective for this year from 1.5 percent to 0.75 percent – and anticipated inflation of almost 4 percent.
That inflated fears of so-called ‘stagflation’ – the catastrophic mixture of stale growth with spiralling costs that took hold in the 1970s.
In a speech today, Rupert Soames, chairman of the Confederation of British Industry, will call for decisive action from the Government to promote growth. He will say the Chancellor’s NI hike had hit ‘the confidence and trust of business’.
Yesterday, Bank of England rate-setter Megan Greene said economic developments over recent months had been ‘uncomfortable’, and the consultancy Capital Economics downgraded its growth outlook from 1.3 per cent to 0.5 percent.
Shadow Chancellor Mel Stride said Ms Reeves ‘needs to make urgent course corrections before the damage she is doing… becomes permanent’.
The Prime Minister’s spokesman said: ‘The Government remains relentlessly focused on growth as the only way of sustainably raising living standards and delivering investment in our public services.’
Several employees will not receive pay increases this year as businesses attempt to strike a balance. Why did Rachel Reeves think this wouldn’t have an impact on us?
When Labour took control, the UK economy was already going ‘gangbusters.’
Starmer and Reeves couldn’t wait to impose their Marxist philosophy on the nation to demonstrate their dominance, but any reasonable politician in that position should have left things alone for a few months, and now, all due to the budget that was a disastrous mess, people are losing their jobs and can’t put food on the table because of this government’s actions, but then, what do you expect from someone with low intellect?
Labour is to blame for this. According to the OBR, they even agreed to inflation-busting pay agreements, which is what caused the fabled black hole, and Rachel Reeves’s budget hardly made a difference either way.
We would save billions of pounds if we prevented migrants from entering the UK, who have nothing to offer but receive everything, and it’s heartbreaking and infuriating.
The UK is extremely understaffed, and wages are so poor we are struggling to attract workers – but God forbid anything should go wrong, because it’s always the fault of us slothful folk!
Nearly everywhere I go, people are complaining about Labour, and how much they detest them.
Labour needs to get its finger out of somewhere and start doing a more satisfactory job because we are in such a mess. Some people might say that the bad mess has moved over from the Tories, but Keir Starmer knew he would be taking on this mess, and he should have been prepared for it. We UK working people are not his cash cows!
THE MONTHLY MOSQUITO 