Rachel Reeves was seeking to win over business chiefs in Davos to invest in Britain by portraying herself as the “Iron Chancellor” who will stick to her fiscal rules and deliver economic growth.
The Labour Chancellor adopted one of Margaret Thatcher’s famous phrases, known as TINA, to argue that ‘there is no alternative to our last Budget”.
She also stressed that the chairman of the Competition and Markets Authority, Marcus Bokkerink, had stepped down after recognising it needed to be headed up by someone sharing the Government’s “strategic direction”.
He was replaced late on Tuesday by the former Amazon executive Doug Gurr on an interim basis.
The Chancellor had demanded that the CMA and other British regulators “tear down the barriers hindering businesses and refocus their efforts on promoting growth” in a meeting last week.
She was dealt a fresh blow on Tuesday by dismal pubic finances figures, partly caused by a spike in debt interest payments.
The Office for National Statistics said public sector net borrowing stood at £17.8 billion last month, the third highest for any December on record.
Borrowing was £10.1 billion higher than the same month last year and more than the £14.1 billion expected by most economists.
Liberal Democrat Treasury spokesperson Daisy Cooper said: “This is yet another sign that the Chancellor’s Budget has not worked.
“It’s now putting people’s mortgages at risk and will make it even harder for the Chancellor to meet her borrowing rules.”
Speaking at the World Economic Forum’s annual meeting in Davos, Switzerland, Ms Reeves insisted the UK would continue to meet her “fiscal rules” because they were the “bedrock” of the stability she hopes to restore to the economy and public finances.
The Government has been hit by rising borrowing costs in January, but Ms Reeves played down the impact that would have on meeting her rules.
She added: “My instinct is to have lower taxes, less regulation, make it easier for businesses to do business.”
But economists warned she may be forced to resort to more tax rises or cuts to public spending plans given the state of the public finances.
Alex Kerr, UK economist at Capital Economics, said the Chancellor’s economic cushion, or fiscal headroom, was now down to around £2 billion from just under £10 billion.
“That combined with a weakening economy suggest that, in order to meet her fiscal rules, the Chancellor may need to raise taxes and/or cut spending in the next fiscal statement on 26th March,” he added.
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said: “We expect the Government to outline spending reductions...at the next fiscal event in March. Further tax increases at the next Budget in October, is also a good bet.”
