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3mo ago

Starmer Signals Fiscal Adjustments as Reeves Faces Pressure to Meet Borrowing Rules

The Prime Minister and Chancellor hint at potential tax or spending changes in the upcoming spring statement as economic forecasts worsen.

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Keir Starmer at a welcome reception at the British ambassador's residence in Washington, DC (Photo: Carl Court/PA Wire)
The Office for Budget Responsibility (OBR) will release forecasts for the economy on 26 March (Photo: Jordan Pettitt/PA Wire)

Overview

  • Keir Starmer and Rachel Reeves have not ruled out tax or spending adjustments in the March 26 spring statement to adhere to Labour's fiscal rules.
  • The Budget Responsibility's forecast shows Reeves' £9.9bn headroom from October's budget may be erased due to weaker growth and higher inflation.
  • Potential measures being considered include extending income tax band freezes, reducing ISA limits, or tightening corporate tax policies.
  • Former Bank of England Governor Lord Mervyn King suggests raising the basic rate of income tax as a long-term solution to address the UK's financial challenges.
  • Economic analysts predict Labour may opt for minor fiscal tweaks to avoid breaching borrowing limits while maintaining public spending commitments.