Michael Race
Business Reporter, BBC News
Getty images
The Chancellor will give an update on her plans for the British economy when she will make a statement alongside an economic forecast on March 26.
Rachel Reeves previously excluded tax increases, but faces difficult choices due to the performance of the British economy and global events.
What is the spring declaration and when is it?
The Office of Budget Liability (OBR), which monitors the government’s spending plans and performance, will publish its forecasts on the British economy on Wednesday, March 26.
He will also provide estimates on the cost of living for households and if he thinks that the government will stick to its self-imposed rules on borrowing and expenses.
Reeves will present the main conclusions of the guard dog in the parliament, and alongside this will make its spring declaration on the economy.
After talking, the opposition, probably either the conservative chief Kemi Badenoch, or the Chancellor of the Shadow Mel Stride, will reply.
What should the chancellor announce?
Reeves is committed to a major economic event – the budget – each year, to “give families and businesses the stability and certainty of tax changes and expenses”.
This means that no big announcement of politics is made on March 26, but that does not prevent them from being done in advance.
The economy considered to be underperforming and global factors, such as commercial prices, having an indirectly impact on the United Kingdom, there are growing speculation about the question of whether the Chancellor breaks her self-imposed rules on the loan.
OBR forecasts should confirm that the financial stamp of 9.9 billion pounds sterling to comply with its budgetary rule by the year 2029/30, has been destroyed.
Reeves has repeatedly said that its rules were “non -negotiable”. Its two main rules are:
Do not borrow to finance daily public spending so that the debt decreases as a share of national income by the end of this Parliament
Before the spring declaration, the Treasury wrote plans for several billion pounds of expenditure discounts.
It is understood that social spending is in the shooting line, but other government services will also see pruned budgets.
The government already had concerns about the growing number of service providers and Reeves previously promised a “fundamental” reform of the social protection system.
The treasure blamed global economic policy and geopolitical uncertainty about the outcome of conflicts in Ukraine and the Middle East, to increase government loan costs.
The other possible announcements that are reported include:
The reduction in the annual annual limit in cash tax franchise in cash ISAS, to encourage more people to invest their savings in the shares and actions confirming the details of the way in which the financing of international aid will be reassigned to the Defense, following the announcement of the Prime Minister that British defense expenses will reach 2.5% of national income by 2027.
Government sources have wanted to affirm that this event is not major because it will not include tax increases, only expense reductions.
A questionable tax hiking policy could however be announced, if Reeves decides to extend the freezing on the thresholds to which people are starting to pay different income tax rates.
Policy is known as an increase in hidden taxes or a furtive tax, because it takes effect in time because people are trained to pay more taxes as their income increases, without the tax rate increasing at all.
The thresholds were frozen by the previous conservative government until April 2025, but the chancellor could decide to extend the frost to raise around 7 billion pounds sterling per year, according to the consulting firm Pantheon Macroeconomics and Investment Bank Citi.
Reeves has decided not to extend the freezing of the threshold in its first budget, arguing that this would “injure workers” and “would withdraw more money from their payments of pay”.
It remains to be seen other discounts of spending in the declaration of spring or in the examination of expenses, or even delayed until the next budget, remains to be seen.
How is the British economy?
Recent figures show that British economic growth has been slow – without narrowing, but not increased as you wish.
The economy increased by 0.1% between October and December 2024, according to the latest official figures.
When an economy develops, more companies can use additional workers or give salary increases. Businesses making higher profits also pay more taxes to the government, which can be spent on public services.
In addition to slow growth, prices also increase more quickly than what wishes.
The current inflation rate of 3% is higher than the target of 2% of the Bank of England and is expected to increase. Inflation could dictate if interest rates are more reduced by their current 4.5%.
Higher rates mean higher borrowing costs for loans, credit cards and mortgage offers, but it also offers better saving yields.
Costs for businesses should jump more in April, when national insurance contributions paid by employers increase. These could be transmitted to consumers.
The pressure also increased on the Chancellor’s tax and expenditure plans after a surplus of government finances missed official forecasts, which prompted speculation to economists that it could break its tax rules with regard to things.
Borrowing fees for the United Kingdom jumped in January in January due to concerns about the economic prospects of the United Kingdom, threatening the economic plans of Reeves. The costs have since fallen back but remain higher than that time last year.
Reeves also warned that a potential world trade war, although the prices did not directly target the United Kingdom, would lower growth and increase inflation.
