Rachel Reeves says Spring Statement will not 'tax and spend'

UK Chancellor of the Exchequer Rachel Reeves has stated that she will not adopt a "tax and spend" policy in the crucial upcoming Spring Statement, suggesting that she will neither raise taxes nor increase government spending. This statement indicates that the government will adopt a more cautious approach to fiscal policy.

In the BBC documentary "The Making of a Chancellor," Reeves warned that the government cannot afford the same level of spending growth as under the previous Labour government. She is expected to cut budgets for some government departments on Wednesday. Previously, the defense budget had been increased by cutting aid budgets. Reeves emphasized that higher living standards and better public services cannot be achieved through "tax and spend."

Reeves significantly increased taxes and public spending in the Autumn Budget, primarily funded by additional taxes on businesses, which sparked considerable controversy. She is currently facing pressure from multiple quarters. Government borrowing, the difference between spending and tax revenue, was even higher than expected in February, with official forecasts at £6.5 billion but actual figures reaching £10.7 billion, further limiting the Chancellor's fiscal space. Furthermore, official forecasts for economic growth are also likely to be downgraded.

Secretary of State for Work and Pensions, Liz Kendall, unveiled a comprehensive reform of the welfare system last week, aimed at saving £5 billion annually by 2030 and creating a more "work-focused" system. These reforms will affect those receiving disability and health benefits, as well as individuals under 22 relying on universal credit top-ups. Reeves will elaborate on the impact of these changes in the Spring Statement and is expected to announce further cuts, this time targeting some Whitehall departments, to meet the rules she has set for the economy.

The Treasury has reiterated that these rules—not borrowing for day-to-day public spending and reducing debt as a proportion of the UK economy by 2029-30—are "non-negotiable." In a BBC interview, Reeves insisted that what she has done so far is to put money into public services. She stated that there is "real growth" in spending in every area in the coming years, but "not at the level when the economy was growing strongly under the last Labour government."

However, Labour grandee Lord Blunkett wants Reeves to "loosen slightly her self-imposed fiscal rules," calling them "Treasury orthodoxy and the worst kind of monetarism." Blunkett told BBC Radio 4's "Westminster Hour" that he would "at least raise by £10 billion to £15 billion the self-imposed rules" to help fund "a new deal for the unemployed, getting half a million young unemployed people into training and into jobs or training programmes."

In an interview earlier this week, Reeves acknowledged that Labour MPs are uneasy about welfare reforms. During the interview, she discussed the progress of her work, following a series of controversies, not only surrounding her decisions but also the accuracy of her CV. When asked if she had been treated fairly and whether she had been treated the same as her male predecessors, Reeves said: "I think that's for other people to judge, for people to judge over time." She added that she understood that the privilege of doing the job she does today comes with a huge amount of scrutiny. She firmly believes that every policy she announces, every pound of public money she spends, and every pound she takes from people is properly scrutinized, and that's part of the job.

Reeves also stated that she finds some of the personal attacks unbearable, as it is not the type of politics she engages in. Shadow Chancellor Mel Stride, responding to Reeves' comments on the economy, said: "Labour Chancellors promise ‘growth, growth, growth’ but since the Budget, growth is down, inflation is up, and business confidence has collapsed. Labour are having to come up with an emergency Budget on Wednesday – a situation entirely of their own making. Rachel Reeves must urgently reconsider her anti-business Budget."