Several billion pounds in spending cuts – including from the welfare budget – are expected in the spring statement later this month.
The Treasury will put forward the proposed cuts to the Office of Budget Responsibility (OBR) on Wednesday, ahead of it providing a financial forecast on 26 March, alongside Chancellor Rachel Reeves announcing her spring statement.
Sky’s deputy political editor Sam Coates revealed on the Politics at Jack and Sam’s podcast that welfare cuts are set to be part of the spring statement package to help the chancellor come within her borrowing limit.
Coates said there would be a “four-point plan” involving planning reform, Whitehall cuts, regulation cuts and welfare cuts.
Ms Reeves is running out of her £9.9bn headroom after months of economic downturn and geopolitical events since last October’s budget.
Her self-imposed fiscal rules mean she cannot borrow for day-to-day spending, leaving spending cuts as one of her only options.
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Starmer refuses to say if further tax rises will be imposed at spring statement
Former Bank of England governor Lord King says income taxes must rise
More pressure to raise taxes or cut spending – despite greatest budget surplus since records began
Over the weekend, Sir Keir Starmer said the government was in the “early stages” of looking at whether tax rises or spending cuts were needed to meet Labour’s self-imposed fiscal rules.
The prime minister refused to say whether further tax rises or spending cuts would be imposed.
The OBR is required to produce two economic forecasts a year, but the chancellor said she would only give one budget a year to provide stability and certainty on upcoming tax changes.
However, the poor economic climate since October is forcing her hand, with inflation rising to its highest level in 10 months to 3%, a sharp rise in government bond yields and growth has not been as high as expected.
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Donald Trump imposed tariffs on Canada, Mexico and China – the US’ biggest trading partners – this week, prompting promises of retaliation and a stock markets to fall sharply across the world on Tuesday.
The UK has not been hit by tariffs yet, but the chancellor said the British economy will still be hit by the US president’s trade war even if the UK strikes a deal with the White House.
“It’s absolutely the case that even if tariffs aren’t applied to the UK we will be affected by slowing global trade, by slower GDP growth and by higher inflation than otherwise would be the case,” she told hundreds of top British manufacturers at a key industry conference.
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