The British economy will only grow by 1 per cent this year, half the rate previously anticipated, Treasury chief Rachel Reeves conceded Wednesday in a statement to lawmakers about the state of the public finances that also saw her flesh out plans to boost defence spending.
Advertisement
Against the backdrop of sluggish economic growth that she blamed on a volatile international environment but which critics say she is largely responsible for, Reeves unveiled measures intended to meet her self-imposed budget rules.
With growth in 2025 lower than anticipated and debt interest repayments higher, the government’s independent forecaster, the Office for Budget Responsibility, found a £14 billion (US$18 billion) shortfall.
Reeves, whose official title is Chancellor of the Exchequer, has partly sought to fill that hole with welfare cuts that has caused widespread unease within the governing Labour Party amid a government-backed assessment that they could push 250,000 people, including 50,000 children, into poverty. She also announced measures to rein in tax avoidance and tax evasion, and by lowering the day-to-day costs of running government.
Longer-term, the OBR’s forecasts were a bit more positive for the government with housing starts on course to meet a four-decade high following widespread planning reforms. Reeves was able to point to higher growth forecasts for the years ahead which if they prove accurate, should ease the pressure on her to lower spending or increase taxes in the remaining years of this Parliament, which can run until the middle of 2029.
Advertisement
However, the agency said the outlook looks “risky”, particularly on the international front. It highlighted risks posed by the prospect of a global trade war in light of the tariff policies being enacted by the Trump administration.