Rachel Reeves has pushed back the expected date of the Budget in a bid to reduce the size of the black hole in public finances with a series of pro-growth measures.
The Chancellor announced on Wednesday that she will lay out her tax-and-spend plans for the coming year on 26 November, later than the usual date of the autumn Budget – and the last Wednesday on which it is possible to describe it as an “autumn” event.
Her move means that the official watchdog, the Office for Budget Responsibility (OBR), will not finalise its forecasts for the economy and public finances until early November.
Relatively weak economic growth and a rise in long-term borrowing costs for the UK Government mean that as things currently stand, Reeves would need to raise tens of billions of pounds through tax hikes or spending cuts in order to avoid breaching her self-imposed fiscal rules, which determine how much she is allowed to borrow over a five-year timeframe.
She hopes that by giving the OBR as much time as possible to draw up its projections, she is making it more likely that the watchdog will take into account Government policies such as planning reform and trade deals with the US, EU and India, which could improve future growth prospects, The i Paper understands.
The Chancellor is also set to make a string of further announcements about her plans to boost economic productivity in the run-up to the Budget.
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Speaking as she confirmed the date, Reeves acknowledged that many voters are unhappy with the state of their living standards and pessimistic about the future.
She said: “Britain’s economy isn’t broken. But I do know that it’s not working well enough for working people. Bills are high. Getting ahead feels tougher. You put more in, get less out. That has to change.”
The Chancellor added: “There’s more to do. Cost of living pressures are still real. And we must bring inflation and borrowing costs down by keeping a tight grip on day to day spending through our non-negotiable fiscal rules.
“It’s only by doing this can we afford to do the things we want to do. If renewal is our mission and growth is our challenge, investment and reform are our tools. The tools to building an economy that works for you – and rewards you.”
Recent days have seen a fresh spike in Britain’s borrowing costs on global markets, amid concerns about levels of long-term debt all across the world and specific questions over whether the UK Government can control public spending and increase the tax take without tanking economic growth.
Reeves has promised she will keep to her existing fiscal rules, which state that the Treasury will only borrow for investment and will put the overall debt pile on a downward trajectory over the next five years.
She has also ruled out changing the spending review, published in June, which lays out the budgets for each Whitehall department between now and 2029. But at the same time, she insists she will not repeat the scale of last year’s Budget when she raised taxes by a total of £40bn a year.
Ruth Curtice, head of the Resolution Foundation think-tank, said: “With higher gilt yields currently adding over £3bn to debt interest costs, and over £6bn of policy U-turns announced since March, the Chancellor is already on track to miss her fiscal rules. With a growth downgrade also likely, significant fiscal tightening will be needed.
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Read More“The Chancellor should use this Budget to set out her tax strategy as well as raise revenue. While tax rises are likely to be necessary, this should aim to ensure they make the system fairer and more efficient, supporting higher growth and lower inequality.”
At the Spring Statement, an update to the public finances earlier this year which did not include tax changes, the Chancellor was given a boost by the OBR when it judged that looser planning rules would boost the economy to the tune of billions of pounds.
Allies of Reeves have expressed optimism that the watchdog will be able to go further at the Budget thanks to deregulation, trade deals and further planning reform.
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