Chancellor Rachel Reeves announces strict fiscal discipline measures. She is clamping down on emergency spending. This move affects all government ministries directly.
Therefore, Reeves recently sent a letter to cabinet ministers. She explained her decision clearly. Consequently, departments will find accessing emergency funds much harder. The Treasury Reserve holds around £9 billion. This fund is for unforeseen and unavoidable costs. Recently, it covered higher public sector pay deals. It also funded government compensation payouts.
Now, Reeves imposes new conditions. Therefore, departments must maximize their savings first. Only then can they request reserve money. Furthermore, any borrowed funds must be repaid later. This policy aims to control government borrowing effectively. It also ensures departments stick to their budgets.
Furthermore, the upcoming Budget is on November 26th. Reeves faces significant pressure there. She must boost economic growth carefully. Simultaneously, she must balance the public finances. Economists warn she needs more money. She might raise taxes or cut spending. Her own borrowing rules demand this.
Moreover, these rules are absolutely non-negotiable for her. First, day-to-day costs must be paid by taxes. This must happen by 2029-30. Second, national debt must fall by the end of the parliament. These strict fiscal discipline measures are her core principle.
However, business leaders offer their advice. The CBI’s Rain Newton-Smith urges tax reform. She does not want more tax rises. Businesses already face high costs. National Insurance and the Living Wage increased recently. Therefore, the chancellor must find money elsewhere.
Therefore, Reeves defends her position strongly. She spoke to her cabinet on Tuesday. Global bond markets are currently fragile. So, stability is absolutely essential for growth. She believes living within our means is vital. She criticized spending billions on debt interest. Instead, she wants money for hospitals and migration issues.
This message targets multiple audiences. It reassures the financial markets about responsibility. It also prepares Labour MPs for tough choices. Reeves agrees backbenchers must resist easy options. The Spending Review already reduced the reserve’s size. Previously it was around £14 billion yearly. The Institute for Fiscal Studies criticized this cut. They said it leaves no room for unexpected events.
The amount needed to meet her rules is unclear. Some estimates suggest £25 billion. Others, like the NIESR, predict £50 billion. Reeves downplayed the larger figure recently. She told the BBC she will get the balance right. Her strict fiscal discipline measures will guide the Budget.
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