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Chancellor Rachel Reeves will try to repair a deep hole in British public finances this week in a spring declaration held in the shadow of Donald Trump, while ministers rush to conclude an agreement with the United States to avoid punitive prices.
Reeves will tell deputies on Wednesday that Great Britain confronts a “changing world” in which he must find more money to defend himself. She warned that “global winds such as commercial uncertainty” cause disturbances.
The Chancellor did not deny that Great Britain plans to change or even delete his tax on digital services, a sample opposed by Trump and American technological companies, in a movement intended to appease the American president.
Any modification made to the tax, which is expected to raise 800 million pounds Sterling this year, would aggravate the already tense public finances of Great Britain. But ministers believe that it could be a price to pay to avoid punitive US global prices, which should be announced on April 2.
The prospect of an escalation of the World Trade War will hang during the Printemps Declaration, when the growth forecasts of October for 2025 with the Budget Liability Office should be reduced from 2% to around 1%.
The Financial Times revealed last week that the debit of digital services is on the table in talks with the United States.
The chancellor, addressing the BBC on Sunday, said that it was “the right thing that companies operating in the United Kingdom pay their taxes in the United Kingdom”, but added: “We are in discussion at the moment around a whole range of things relating to prices with the United States.”
British officials claim that the United Kingdom and the United States are about to finalize the “chiefs of agreement” on an economic agreement which would initially focus on technological cooperation and prices.
The British digital service tax, which affects American technological groups, including Alphabet, Meta and Amazon, was introduced by the former conservative government in April 2020 to ensure that global digital companies paid a tax that reflected the value they derive from British customers.
The 2% flat-rate tax is applied to companies that have world income over 500 million pounds and sterling and apply to the UK derivatives.
Treasury officials say that any agreement with Washington would occur too late to appear in Wednesday’s declaration, but ministers wish in place before April 2, nicknamed “World Tariff Day” in Whitehall.
The Chancellor already has major budgetary problems, after the slow growth and the increase in borrowing costs, destroyed the 9.9 billion sterling pounds that she had against her budgetary rule – which indicates that current expenses must be balanced with tax revenue by 2029-30 – in her October budget.
New OBR forecasts should show that Reeves is in the red of about 4 billion pounds sterling, according to people familiar with the evaluation, leaving him to find nearly 15 billion pounds sterling to rebuild his current tax height.
The Reeves solution will include 5 billion pounds sterling of well-being savings announced last week and 2 billion pounds sterling in the switching of assistance abroad to a capital defense budget. Another billion pounds sterling should be noted from improving tax compliance.
The majority of the remaining gap will be funded by the expenses planned by the Whitehall departments later in Parliament, a plan that created a dissent at a meeting of the cabinet earlier this month.
Reeves said on Sunday that 10,000 civil servants would lose their jobs when she announced that Whitehall Cuts intended to save more than 2 billion pounds sterling by 2029-30, with officials saying in private that “tens of thousands” of positions could go. The public service had 514,000 Full -time equivalent staff in December 2024.
Reeves said that better use of technology and cuts in the use of consultants could save Whitehall, as well as budget reductions for communications and travel.
“I am convinced that we can reduce the public service numbers by 10,000,” Reeves told Sky News, Trevor Phillips.
Dave Penman, head of the FDA public service union, warned that the cuts could cause job losses and harm public services. “The idea that the cuts of this scale can be delivered by cutting the HR and Comms teams is for birds,” he said.
Meanwhile, Sir Keir Starmer, Prime Minister, will try to show Monday that he is still investing in the priorities of voters despite limited public finances, establishing the details of a nest-of-poule filling program.
