Chancellor Rachel Reeves has ruled out major tax hikes or spending increases ahead of her critical Spring Statement next week, signaling a shift away from “tax and spend” policies. Speaking in a BBC documentary, The Making of a Chancellor, Reeves emphasized that the government cannot afford the kind of public spending increases seen under previous Labour administrations.
Spending Cuts and Fiscal Constraints
Reeves is expected to announce cuts to certain government departments on Wednesday, with additional funding for defence coming at the expense of the aid budget. She reiterated that improving public services and raising living standards cannot be achieved solely through increased taxation and government expenditure.
In her autumn Budget, Reeves introduced higher taxes, primarily targeting businesses, to fund increased public spending. However, she now faces mounting fiscal pressure, as government borrowing in February reached £10.7 billion—far exceeding the Office for Budget Responsibility’s forecast of £6.5 billion.
Adding to these challenges, economic growth forecasts are expected to be downgraded, further limiting the Treasury’s financial flexibility.
Welfare Reforms and Further Cuts Expected
Last week, Work and Pensions Secretary Liz Kendall introduced significant changes to the benefits system, aiming to save £5 billion annually by 2030. These reforms target disability and health benefits, as well as universal credit payments for those under 22. Reeves will outline the financial impact of these measures in her Spring Statement and is expected to announce further departmental spending cuts to meet her fiscal rules.
The Treasury has maintained that Reeves’ economic guidelines—including avoiding borrowing for day-to-day spending and ensuring that national debt declines as a share of GDP by 2029-30—are “non-negotiable.”
Labour Divisions Over Fiscal Policy
Despite Reeves’ insistence on maintaining strict fiscal discipline, some senior Labour figures have urged a more flexible approach. Former Work and Pensions Secretary Lord Blunkett has called for easing the self-imposed rules by at least £10-15 billion. He argues that increased spending could support job creation and training programs for young people, helping half a million unemployed individuals back into work.
Reeves, however, remains firm in her stance, acknowledging in her BBC interview that while public spending will see “real growth” in the coming years, it will not match the levels seen under past Labour governments due to weaker economic conditions.
Political Pressure and Scrutiny
Reeves is also facing scrutiny beyond economic policy. Controversies have emerged over the accuracy of details in her CV, adding to the pressure from both opposition parties and within Labour ranks. Addressing criticism in a recent interview, she acknowledged the heightened scrutiny that comes with her role but dismissed personal attacks, stating that she remains focused on policy decisions and public accountability.
Opposition Criticism
Shadow Chancellor Mel Stride criticized Reeves’ economic policies, accusing Labour of mismanaging the economy. “The Labour Chancellor promised ‘growth, growth, growth,’ but since the Budget, growth is down, inflation is up, and business confidence has collapsed,” Stride said. He added that Labour’s upcoming Spring Statement amounts to an “emergency Budget” necessitated by their own fiscal policies.
As Reeves prepares to deliver her statement next week, she faces the challenge of balancing economic stability with mounting political and public expectations for investment in public services.
