REEVES BETWEEN A ROCK AND A HARD PLACE ON UK BUDGET

By Mike Jarvis, UK Correspondent & Senior Writer

Days after presenting the UK’s annual Budget Autumn Statement, the main budget address - the other being an update in the Spring - Chancellor of the Exchequer (Minister of Finance) Rachel Reeves is facing mounting calls to resign. Her critics claim that she had lied about the state of the economy in order to justify raising taxes and increasing welfare spending.

This refers to a report suggesting that the UK’s Office for Budget Responsibility (OBR) had advised the government in September that the black hole of deficit inherited by the Labour Party government, which took office last year, had been considerably reduced during that period.

But now her critics, led by the main opposition Conservative Party and other political groups, along with several professional organisations, are calling for her to quit or be fired, saying that she misled the country.

However, Chancellor Reeves is sticking to her guns, stating on a main BBC Sunday television news and current affairs programme: “I know that some people are suggesting that there was a small surplus that the OBR published on Friday…But if I was on this programme today and I was saying £4bn surplus is fine, there was no economic repair job to be done, I think you would rightly be saying that’s not good enough.”

But the leader of the main opposition Conservative Party, Kemi Badenoch, speaking on the same programme, insisted that the Chancellor lied and must go. “The Chancellor called an emergency press conference, telling everyone about how terrible the state of the finances were, and now we have seen that the OBR had told her the complete opposite. Because of that, I believe she should resign.”

The influential Institute for Fiscal Responsibility (IFR) said in its assessment of the budget: “Ensuring greater headroom is sensible, though uncertainty over future revenue could throw Reeves off course. The welcome news from the budget was that Rachel Reeves has increased her headroom against her fiscal rules. Even relatively small changes to the economic outlook could throw her plans off course.”

The Labour Party convincingly won the 2024 election mainly on a mandate because the Conservatives, which had been in power for the previous 14 years, had mismanaged the economy and government finances, leaving a massive deficit.

Among the budget measures which have triggered strong critical reactions are an increase in inheritance tax on high-value properties, additional rates on property income, savings and dividend income, a new levy on the previously untaxed zero-emission cars and electric vehicles, as well as changes to the threshold for salary-sacrificed pension contributions.

Some taxes are being frozen for the rest of the parliament, or time to come into force gradually during that period. The government’s welfare bill is due to rise, especially with the removal of the restriction limiting welfare payments to two children of unemployed or lower-paid workers.

The UK’s Gross Domestic Product (GDP) is forecast to grow by 1.4 per cent in 2026, down from a previously anticipated 1.9 per cent, then levelling out at 1.5 per cent for the rest of the decade. Inflation is projected to be 3.5 per cent this year and 2.5 per cent in 2026.