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The Chancellor described it as a spring declaration. The conservatives called it an emergency budget. In practice, Rachel Reeves’ 33 -minute declaration to the deputies had all the characteristics of a maintenance operation.
The central characteristic of the Chancellor’s Declaration was an explanation for the way it would fulfill a tax hole of 14 billion pounds Sterling which has opened since its budget in October, the result of the increase in borrowing costs and stagnant growth.
It was a repair work, carried out by a mixture of social cuts, reductions in planned daily expenses, a repression of tax evasion and a blitz on the efficiency of the public service, all announced with a minimum of agitation.
But the essential meaning of Pirates“The speech was that the main objective of the spring declaration was to keep the tax show on the road. The next six months seem likely to present a much more important economic and political test.
“The world is changing – we can see it and we can feel it,” said Reeves to Mpp. She did not mention Donald Trump by name, but the American president threw a shadow on the speech of the Chancellor.
Whether it is its promise to finance a British reset program or its warning that world trade models could become “more unstable”, the threat of the British economy of the Trump presidency is clear.
The fiscal liability office highlighted the fact that the 9.9 billion Sterling of Reeves absorber absorber funds against its key budgetary rule – to balance current expenses with tax receipts by 2029-30 – was fragile.
He indicated that it was only a third of the average figure – 31.3 billion pounds Sterling – put aside by the previous chancellors since 2010. If things go wrong, Reeves will have a difficult choice in his fall budget – including additional potential tax increases.
Oliver Dowden, former conservative Deputy Prime Minister, told Financial Times: “She has exhausted the Labor Party appetite for expense reductions. When she returns in the fall with tax increases, she will have big troubles. ”
Many labor deputies are already extremely nervous about 3.4 billion pounds sterling of net-Bien-Being savings aligned by Reeves; A Government impact assessment Politics has filled a fear.
He noted that a quarter of a million people, including 50,000 children, will be pushed to relative poverty due to social protection reforms. “The atmosphere is dark,” said a veteran deputy for work. “You will not see a great revolt or anything, but people are on the ground.”
Some cabinet ministers are daily cuts and are labeled as “a return to austerity” by a conservative party long associated with the sentence. Other major discounts will bring a political price.
Reeves hopes that the worst can be avoided and that Great Britain can conclude a rapid trade agreement with Trump to avoid the most punitive American prices. But Great Britain will be struck like all other economies by a world war in trade, which the OBR warned could destroy the margin it plans to restore through Wednesday measures.
The chancellor should also intensify requests to Sir Keir Starmer to use his “reset” talks with the EU in the coming weeks to put pressure for an economic partnership improving growth.
But any economic deterioration could force Reeves to return to the issue of higher taxes, only one year after announcing 40 billion pounds of the increase in taxes, of which 25 billion pounds sterling have dropped employers thanks to higher national insurance payments.
Given that it has excluded any increase in income tax, national insurance contributions from employees or VAT, its room for maneuver is increasingly limited.
There were other economic warning signs. The OBR suggested that mortgage interest rates will be 0.2 higher percentage points during the forecast period than scheduled for October.
The forecastist also presumed that 76% of the cost of the NAVS increase would be transmitted to workers “via lower real wages”. He said most of the business leaders indicate a substantial reduction in nominal wages.
There were light points in the declaration of Reeves who will have given the joy of labor deputies. OBR believes that Reform planning will increase growth And it increased its growth forecasts for later in Parliament to around 1.75%, even if it reduced this year’s prediction to only 1%.
Reeves claims that higher defense expenses, reaching 2.5% of GDP in 2027, underlie a defense and industrial renaissance in Great Britain. The OBR also praised government plans to increase the construction of houses.
Summer will see reeves supervising a new industrial strategy and will conclude a “zero review” of all public spending. “It is a government with the courage to intensify,” she insisted.
Although the Spring Declaration was a difficult time for Reeves, there was a meaning among the deputies who left the Chamber of the House of Commons that the next six months will be even more tested – and are likely to define its time as Chancellor.
