Chancellor Rachel Reeves is facing a setback as economic growth forecasts have been lowered ahead of her first budget. The UK budget, set to be announced on October 30, is expected to include approximately £40 billion in savings. There are speculations that employer national insurance contributions may increase, potentially generating £15.4 billion in revenue to address a projected £22 billion deficit in public finances.
Leading up to the budget announcement, Chancellor Reeves has emphasized that her plans will prioritize economic stability. However, recent economic forecasts indicate a decrease in the UK’s gross domestic product (GDP) growth. While the EY Item Club previously predicted a 1.1% growth for the upcoming year, the latest quarterly forecast estimates a mere 0.9% GDP increase in 2024. This downward revision is attributed to cautious consumer spending habits.
Looking ahead, growth projections for 2025 have also been downgraded to 1.5%, down from the previously anticipated 2%. Chancellor Reeves is currently in Washington D.C for the IMF Annual Meetings, where she will engage in discussions on the global economy and support for Ukraine. She aims to assure world leaders that the forthcoming budget will lay the groundwork for future growth and economic stability.
Despite the economic challenges, Chancellor Reeves remains committed to representing British interests on the global stage. However, concerns have been raised about potential tax increases and their impact on working individuals. Labour’s manifesto promises not to raise taxes on working people, including national insurance, income tax, or VAT. Deputy Prime Minister Angela Rayner faced questions on defining “working people” and the implications of tax policies on small business owners.
In response, Rayner defended Labour’s commitment to supporting businesses and workers, highlighting the need to address the economic aftermath left by previous administrations. The debate over tax policies and economic recovery underscores the complexities facing the Chancellor as she navigates the budget planning process. Despite the challenges, Chancellor Reeves remains resolute in her vision for economic stability and future growth in the UK.
