The Office for Budget Responsibility has said that the Chancellor Rachel Reeves has just a 50/50 chance of avoiding having to come back with more tax rises or spending cuts in the Autumn Budget
Amongst its other prediction it says that Donald Trump’s tariffs could entirely wipe out the government’s headroom, with a 0.6 % hit to GDP in 2026-27
It has forecast growth will be halved next year then rising over rest of Parliament. Overall 0.5% lower than previously forecast
Meanwhile the tax burden will rise to a record level of 37.7% next year, fuelled by hike in employers’ NI and more people being hit by fiscal drag
It says that the announced benefit cuts will push 250,000 people, including 50,000 children, into poverty while three 3million families with disabilities will lose an average of £1,720
There has been much reaction to the statement
“This government’s attempt to justify cutting benefits has completely fallen apart. They’re slashing support for ill and disabled people to meet their arbitrary fiscal rules.“ says the National Economics Foundation
Adrian Young, a tax partner at accounting and business advisory firm HURST, said:
“It is still very early in the new Labour administration, and as to be expected Reeves has put a very positive gloss on the action taken to date.
“She was, however, noticeably silent on some of the more problematic issues that face employers in particular, given the imminent hikes in national insurance contributions and the increase in the national minimum wage, all of which impact from the start of the new fiscal year on April 6.
“We will need to see how these changes affect economic growth over the next few months, especially in troubled sectors such as retail and hospitality, before we can accurately assess progress.”
UNISON general secretary Christina McAnea said:
“This government gets the value of public services. Unlike its predecessors whose economic policies left schools, hospitals and councils in tatters.
“But failure to invest in essential services and staff at this critical time for the UK would be a false economy. Well-resourced essential services and workforces can help Rachel Reeves deliver vital growth.
“If the economy is to pick up from next year, as forecasts suggest, this must be translated into increased resources for under-pressure public services, beginning with June’s spending review.
“The chancellor’s been left with an unenviable task. The world has changed since the summer. But extraordinary times require bold solutions. With so little wriggle-room, the chancellor should stop backing herself into a corner with fiscal rules and borrow more to invest.
“Cuts to welfare and attacks on those least able to support themselves are not the right way to deliver a thriving economy, nor good quality public services. The Office for Budget Responsibility doesn’t always get things right and forecasts change.
Lord John Bird, Big Issue founder and crossbench peer, said:
“The government needs to think long-term and safeguard the state for five, ten years’ time, when their failure to pull people out of poverty will truly come home to roost. Poverty will have knock-on consequences for all our lives – from a burgeoning welfare budget burdening taxpayers, to strained public services, and opening the floodgates to a rise in far-right populism.
“The welfare cuts and faux austerity in Whitehall announced in today’s spring statement will drive people into poverty and deeper into destitution. Things will only change if the government spends serious money on breaking the cycle of poverty – on preventing and curing poverty. They can’t wait for fairweather days to roll over the hill before they act.”
