Rachel Reeves to choose spending cuts over tax rises in spring statement
20 March 2025, 00:35
Rachel Reeves is expected to choose spending cuts over tax rises at next week's spring statement, as the Chancellor attempts to balance the books.
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Reeves, who is set to deliver her statement next Wednesday, will make the economic announcements against the backdrop of a faltering economy and tighter headroom when it comes to the fiscal rules she set herself in October.
The chancellor's adjustments come in response to reduced growth forecasts by the Office for Budget Responsibility (ONS) and the Bank of England, with the government attempting to fill a notable black hole of between £15 billion and £20 billion in the public finances.
The growth figures, combined with higher-than-expected borrowing, were expected to put pressure on Ms Reeves to increase taxes or cut spending in order to meet the financial rules she set at the budget.
It is understood that changes to the tax regime are not expected next week.
On Wednesday, Prime Minister Sir Keir Starmer had failed to repeat the Chancellor's commitment not to extend the freeze on income tax thresholds ahead of next week's statement.
Conservative leader Kemi Badenoch had asked him to affirm the pledge during Prime Minister's Questions.
In the autumn budget, Ms Reeves decided not to extend the freeze on the thresholds at which people start to pay different rates of income tax.
Thresholds were initially frozen by the previous Conservative government until April 2028.
Speaking on Wednesday, Mrs Badenoch said: "The Chancellor promised a once-in-a-parliament budget, that she would not come back for more.
"And in that budget, she said there will be no extension of the freeze in income tax thresholds.
"Ahead of the emergency budget, will he repeat the commitment that she made?"
Sir Keir replied: "She's got such pre-scripted questions she can't actually adapt them to the answers that I'm giving. "I think she now calls herself a Conservative realist. Well, I'm realistic about the Conservatives.
"The reality is they left open borders and she was the cheerleader.
"They crashed the economy, mortgages went through the roof. The NHS was left on its knees, and they hollowed out the armed forces.
"This Government has already delivered two million extra NHS appointments, 750 breakfast clubs, record returns of people who shouldn't be here, and a fully funded increase in our defence spending.
"That is the difference that a Labour Government makes."
