Rachel Reeves has blamed “global uncertainty” for the sweeping budget cuts aimed at addressing a fiscal deficit driven by rising borrowing costs and sluggish economic growth.
Addressing the House of Commons on Wednesday, March 26, the chancellor revealed that the UK’s projected economic growth for 2024 had been slashed from 2% to 1% by the Office for Budget Responsibility (OBR). Without urgent intervention, she warned, the government would fail to meet its fiscal targets.
Striking a resolute tone, Reeves outlined a series of measures in her spring statement that she claimed would transform a predicted £4.1bn shortfall into a £9.9bn surplus over the next five years. “This will restore in full the headroom against our fiscal rules,” she declared.
Her remarks served as a direct message to her cabinet colleagues and Labour backbenchers who had advocated for a reassessment of fiscal policies. Reeves dismissed such calls, stating that the rules were “non-negotiable” and represented the government’s “unwavering commitment to economic stability.” Abandoning them, she suggested, would risk repeating the financial chaos caused by Liz Truss’s mini-budget.
To soften the impact of budget cuts, Reeves announced billions in long-term investment, focusing on housing construction and an increase in defense spending.
“The responsible choice is to reduce our levels of debt and borrowing in the years ahead so we can spend more on the priorities of working people.”
Rachel Reeves
However, the depth of the welfare cuts has sparked a backlash among Labour backbenchers, charities, and campaigners. The government had initially underestimated the fiscal impact of previously announced changes to the welfare system, forcing Reeves to identify billions in additional savings.
As a result, the universal credit standard allowance will be increased from £92 per week to £106 per week by 2029-30, but health-related entitlements linked to universal credit will be cut by 50% and then frozen.
In what she called a “final adjustment,” Reeves confirmed that these measures, coupled with a £1bn employment support scheme for benefit claimants, would generate £3.4bn in savings.
Additionally, the chancellor announced a reduction in the civil service headcount, aiming to save £3.5bn by 2029-30.
While defending the necessity of these cuts, Reeves attempted to shift attention towards government investment in defense and infrastructure, promising an annual top-up of £2bn for key projects beyond the autumn budget.
Economic Outlook and Housing Strategy
Reeves sought to contrast Labour’s strategy with that of the previous government, emphasizing the risks of cutting long-term investment.
“[In the past] that choked off growth and left our school roofs literally crumbling. That was the wrong choice, it was the irresponsible choice, it was the Tory choice.”
Rachel Reeves
Highlighting the government’s efforts to boost economic growth, Reeves cited the OBR’s assessment of Labour’s housing reforms, including the mandatory housing targets announced in December by Angela Rayner. The watchdog predicted these policies would add 0.2% to GDP and generate over £6bn by 2029-30.
According to the OBR, the reforms will help deliver 1.3 million new homes by the end of the parliamentary term, inching closer to the government’s 1.5 million target.
The UK economy has teetered on the edge of stagnation in recent months, with households struggling under persistent inflation and high borrowing costs from the Bank of England. Despite the downgraded growth forecast for 2024, Reeves highlighted an improved economic outlook beyond this year.
The OBR projects consistent growth until the end of the decade, attributing this to Labour’s planning reforms, which are expected to add 0.2% to GDP within five years and 0.4% within a decade — equivalent to a £15.1bn boost. “[That is the] biggest positive growth impact that the OBR have ever reflected in their forecast for a policy with no fiscal cost,” Reeves noted.
However, the opposition was quick to criticize the government’s approach. Shadow Chancellor Mel Stride accused ministers of failing to deliver on their electoral promises, arguing that their policies had left the country “weaker and poorer.”
As such, Reeves’ fiscal strategy reflects a determined push for economic stability, yet concerns linger over the lasting effects of welfare cuts and whether growth-driven policies will truly offset public hardship.
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