Rachel Reeves has said ‘we can’t tax and spend our way to higher living standards’ ahead of her Spring Statement next week as high government borrowing puts pressure on finances.
The Chancellor is under pressure to increase taxes or cut spending to successfully carry out October’s Budget as borrowing has been higher than expected and growth figures have been disappointing.
Figures released on Friday delivered a further blow, showing public sector net borrowing was an enormous £10.7billion in February – a whopping £4.2billion more than was forecast by the Office for Budget Responsibility (OBR).
And the Bank of England has reduced its forecasts for growth this year, causing the OBR to make new forecasts.
But Ms Reeves has suggested, ahead of delivering her Spring Statement on Wednesday, that she will not raise taxes or spending in an interview with the BBC.
She said: ‘We can’t tax and spend our way to higher living standards and better public services. That’s not available in the world we live in today.’
Spending on defence has already been boosted by slashing aid budgets – and sweeping cuts to welfare were announced this week.
Former Labour work and pensions secretary Lord Blunkett has urged the Chancellor to loosen her fiscal rules – and spend the money that would release on unemployment.
Rachel Reeves (pictured) has said ‘we can’t tax and spend our way to higher living standards’ ahead of her Spring Statement next week as high government borrowing puts pressure on finances
The Chancellor is under pressure to increase taxes or cut spending to successfully carry out October’s Budget as borrowing has been higher than expected (pictured) and growth figures have been disappointing
Former Labour work and pensions secretary Lord Blunkett (pictured) has urged the Chancellor to loosen her fiscal rules – and spend the money that would release on unemployment
He told BBC Radio 4’s The Week in Westminster he thought the Government should introduce more breathing room into its rules on tax and spending: ‘I would like the Chancellor to loosen a little the self-imposed fiscal rules, this is Treasury orthodoxy and monetarism at its worst.
‘I would lift them marginally. I would raise the self-imposed rule by at least £10-15billion and I would spend a great chunk of it on what we did back in ’97 with the new deal for the unemployed.’
Earlier this week, Treasury minister Darren Jones denied accusations the Government is ‘blindly cutting spending’ and moving towards austerity.
It comes as experts estimate around a million people in England and Wales will lose their disability benefits as part of a welfare overhaul the Government believes will save more than £5billion per year by the end of the decade.
All Government departments have been asked to go through their spending line by line.
Ms Reeves told the BBC: ‘I recognise that with the privilege of doing a job like the one I’m doing today also comes a great deal of scrutiny.
‘I absolutely believe that every policy that I announce, every pound of public money, of taxpayers’ money that I spend, and every pound that I take from people is properly scrutinised. That’s part of the job.’
