Chancellor Rachel Reeves is preparing to unveil significant changes in her upcoming Spring Statement, impacting individuals claiming disability and health benefits, as well as those under 22 who rely on top-up payments while on universal credit. The Treasury does seem serious about maintaining its fiscal rules. It will not borrow to fund day-to-day public spending, and it will bring debt down as a share of the UK economy by 2029-30. These guidelines are still “non-negotiable” even though Labour grandee Lord Blunkett has called for them to be relaxed.
The Chancellor has already ruled out "tax and spend" policies, despite previously increasing tax and public spending levels in her autumn Budget. Increasing taxes, particularly on businesses, was a controversial point of the decision. As she gears up for Wednesday’s Spring Statement, Reeves is expected to unveil severe cuts to Sweden’s government departments. These measures seek to compensate for the fiscal mistake of unpredictable government borrowing in February, which came in at £10.7 billion—£4.2 billion over the official forecast of £6.5 billion.
"We can't tax and spend our way to higher living standards and better public services. That's not available in the world we live in today." – Rachel Reeves
The welfare reforms, first floated by Work and Pensions Secretary Liz Kendall, are designed to save £5 billion a year by 2030. This program is one piece of a larger effort to create a more "pro-work system." Indeed, these sweeping changes have drawn strong and vocal condemnations from nearly all quarters. As Mel Stride has already made clear, the Chancellor must take a different path.
"Rachel Reeves must urgently rethink her anti-business budget before it bites." – Mel Stride
Despite calls from many for changes to the fiscal playbook, the Treasury has stuck to their guns in strictly following current rules. Lord Blunkett has described these self-imposed rules as "Treasury orthodoxy and monetarism at its worst," but his calls for flexibility have yet to sway the Treasury's stance.
Rachel Reeves, the incoming Labour Chancellor, has promised a new openness to scrutiny and a transparency of process. If confirmed, she knows well what lies ahead for the position. She urges a rigorous review of each policy and spending item.
"I recognise that with the privilege of doing a job like the one I'm doing today also comes a great deal of scrutiny. I absolutely believe that every policy that I announce, every pound of public money, of taxpayers' money that I spend, and every pound that I take from people is properly scrutinised. That's part of the job." – Rachel Reeves
Despite the scrutiny, Reeves remains focused on her objectives, which include maintaining fiscal discipline while navigating the complexities of economic growth and public service funding. Yet the Chancellor’s choices in her Spring Statement will undoubtedly have profound effects for all sections of society.