'Deceiving' Budget Plan Faces Scrutiny
Chancellor Rachel Reeves is facing accusations of presenting a 'deceiving' Budget that postpones crucial debt reduction measures while increasing short-term borrowing to fund welfare spending. The Resolution Foundation, a prominent left-leaning think tank, has raised serious concerns about the delayed 'repair job' for Britain's public finances.
The organisation, previously led by current Treasury minister Torsten Bell, suggests the Chancellor's approach is misleading by back-loading consolidation measures. This comes after income tax thresholds were frozen for an additional two years, effectively creating a stealth tax rise for millions of workers.
Budget Figures Reveal Borrowing Increase
Official forecasts from the Office for Budget Responsibility reveal a concerning picture. Next year, taxes are projected to increase by just £700 million while government spending surges by £6.6 billion, indicating that borrowing will need to rise substantially to cover the gap.
The longer-term outlook shows even starker changes. By the 2029/30 forecast year, tax intake is expected to jump to £26 billion while spending growth slows to an increase of £11.3 billion.
Ruth Curtice, chief of the Resolution Foundation, commented: "By more than doubling the headroom against her fiscal rules, the Chancellor has taken steps to repair the public finances, too. But appearances can be deceiving. Debt is up and most of the fiscal repair job has been put on hold for three years."
Interest Rate Concerns Emerge
The Budget has sparked debate among economists about its potential impact on interest rates. Analysts at Pantheon Macroeconomics have warned that the measures don't provide sufficient justification for the Bank of England to plan further rate cuts in the new year.
Rob Wood and Elliott Jordan-Doak from Pantheon stated: "The medium-term inflation changes are small but, if anything, give the Monetary Policy Committee reason to cut rates more slowly after December than they previously planned. There is an inconsistency between the Chancellor trying to massage down headline inflation in the near term while supporting labour costs and demand."
However, contrasting views emerged from Panmure Liberum's Simon French, who suggested the Budget could pave the way for multiple interest rate cuts. He described it as "less directly inflationary" than previous budgets and noted that additional fiscal headroom of £22 billion could improve market sentiment.
Speaking to broadcasters on Thursday morning, Chancellor Reeves defended her approach, explaining she had to raise taxes due to OBR forecasts that downgraded productivity growth projections across the five-year period. She maintained that growth remains her top priority and expressed determination to beat the OBR's forecasts.
"If we can grow the economy, as I'm determined to do, we can get that money back," she told Times Radio, while insisting the Budget did not breach manifesto commitments on income tax, national insurance, or VAT rates.
