RACHEL Reeves will unveil her Spring Statement tomorrow as the state of the public finances is laid bare.
The Chancellor will deliver a 20-minute assessment on the UK economy – but she has already signalled it won’t be a “tax and spend” event.
However, she is facing trouble ahead on several fronts with government borrowing higher than predicted and growth expected to plummet.
She will be told that her headroom of around £10billion from last year has been wiped out.
Here, we take a look at what the public can expect to hear when the Chancellor gets to her feet in the House of Commons at 12.30pm.
TAX
The Chancellor has spelled out that the Spring Statement won’t be the occasion to raise or lower taxes.
She vowed to have only one major fiscal event per year so any such decisions will have to be put back until the Autumn.
She used last autumn’s event for a £40billion tax raid including the controversial £25billion hit to business with a national insurance rise.
Speaking at the weekend, Ms Reeves said: “We did have to put up some taxes on businesses and the wealthiest in the country in the Budget.
“We will not be doing that in the Spring Statement next week.”
SPENDING CUTS
Rachel Reeves is expected to announce further spending cuts to Whitehall departments in a bid to balance the books.
She has put in place tough fiscal rules – not to borrow to fund day-to-day spending, and to get debt falling as a share of the economy by the end of the decade.
The Chancellor has her sights set on the civil service with its size ballooning since the pandemic.
Speaking to the BBC on Sunday, she said: “We are, by the end of this Parliament, making a commitment that we will cut the costs of running government by 15 per cent.”
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Her comments come after Cabinet enforcer Pat McFadden wrote to government departments calling for £2billion worth of savings by the end of the decade.
She said that each department has been tasked to rank their spending from the most vital to options that can be ditched.
Ms Reeves said: “We want to put more money into the things that are the most important things for voters, for citizens, and less money on the things that are just not necessary or we should be doing in a different way.”
GROWTH
The decisions Rachel Reeves makes will be largely dictated by the Office for Budget Responsibility, who will tell her of the UK’s growth forecast.
It is expected to downgrade predictions for growth in the UK economy from two per cent for this year to around one per cent.
She will attempt to argue that the global outlook is to blame, telling MPs that “the world has changed”.
Donald Trump’s decision to impose tariffs from next week will have huge knock-on effects for growth.
But it will be a major blow not only to the Chancellor but to Sir Keir Starmer, who has made growth his “number one priority”.
Business leaders have already been attacking the government, saying their decision to raise NI has worsened the UK’s prospects.
WELFARE
Rachel Reeves and Welfare Secretary Liz Kendall delivered £5billion of cuts to the benefits bill last week.
This will make up some of the £10billion wiped out from the Chancellor’s headroom.
She has previously said that the government needs to “get a grip” on the welfare bill to make it fairer to both the taxpayer and those receiving the cash.
The impact of the cuts will also be revealed on Wednesday when an assessment is published – likely to spark fury in Labour ranks.
Labour MPs are lobbying the government so individuals don’t lose several thousand pounds as part of the cuts.
The health and disability bill which sits at £65billion is expected to rocket to £100billion over the next four years.
