The UK Treasury has identified several billion pounds in draft spending cuts targeting welfare and other government departments, as Chancellor Rachel Reeves faces mounting pressure to stabilize public finances. With global economic challenges eroding the government’s fiscal flexibility, the Treasury is preparing to present its proposed cuts to the Office for Budget Responsibility (OBR) on Wednesday, ahead of the highly anticipated Spring Statement later this month.
The OBR’s upcoming forecast, set to accompany the Spring Statement, is expected to reveal a significant reduction in the £9.9 billion fiscal headroom previously available to the chancellor. This shift is attributed to global economic headwinds, geopolitical uncertainty, and weaker-than-expected UK productivity growth.
A government insider commented, “Clearly, the world has changed a lot since the autumn Budget. People are watching that change happen before their eyes. The OBR will reflect that changing world in its forecasts, and it will be a core feature of the chancellor’s response.”
The Treasury’s proposed measures aim to realign public finances with the chancellor’s self-imposed borrowing rules. These include adjustments to tax and spending policies, as well as efforts to address rising government borrowing costs fueled by global economic instability.
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