RACHEL Reeves has sought to blame deteriorating public finances on a global rise in borrowing costs as she prepares to unveil her Spring Statement.
Ahead of the statement on Wednesday afternoon, the SNP called for the Labour Chancellor to ditch the Tories’ fiscal rules instead of imposing “austerity cuts to families and public services”.
Reeves has imposed rules which say that day-to-day spending costs are to be met by tax revenues by 2029/30, with any borrowing only to cover investment. They mirror the Conservatives’ rules from their time in government.
Dave Doogan MP, the SNP’s economy spokesperson at Westminster, said the Chancellor was "making the wrong political choices by cutting public services, and slashing support for families, instead of ditching her damaging Tory spending rules and tackling the root causes of Brexit Britain's broken economy".
He said: "The Labour Party promised there would be no cuts and that economic growth and living standards would improve – but it has broken all three of those promises.
"On Keir Starmer's watch, the UK economy is tanking, economic growth has been slashed in half, unemployment is rising and the cost of living is soaring.
"UK poverty and inequality are at a record high – and the evidence shows all families will be worse off by 2030 under this Labour government. That is an appalling record of failure.
"The Chancellor is making the wrong political choices by cutting public services, and slashing support for families, instead of ditching her damaging Tory spending rules and tackling the root causes of Brexit Britain's broken economy, including the failure to rejoin the EU single market.”
Speaking to broadcasters ahead of her statement, the Chancellor said Britain had not been “immune” from global increases in the cost of government debt.
But she insisted she would meet her “non-negotiable” fiscal rules despite expectations that official forecasts also published on Wednesday would show her “headroom” against those targets had vanished.
She said: “We can see that the world is changing, and part of that change is increases globally in the cost of government borrowing – and Britain has not been immune from those challenges.
“The OBR [Office for Budget Responsibility] will set out their verdicts on growth and on the public finances, but we will continue to meet the fiscal rules I set out in the Budget last year.
“Economic stability is non-negotiable, I will never play fast and loose with the public finances like the previous government did.”
Economic uncertainty has seen the cost of government borrowing rise across the world, with a report published by the Organisation for Economic Cooperation and Development last week showing its members were now spending more on debt interest than defence.
In the UK, the yield on 10-year gilts, effectively the cost of government borrowing, has risen from 4% a year ago to 4.7%.
In October, the OBR had already forecast that the UK Government would spend £105 billion on debt interest payments, equivalent to around 8% of total spending, and recent rises in the cost of borrowing is likely to see that increase.
Economists have suggested that this, combined with the UK’s stuttering growth, will mean the £9.9 billion of headroom Reeves had against her fiscal rules in October would be eliminated, requiring Wednesday’s statement to deliver either spending cuts, tax rises, or the abandonment of those rules.
Elsewhere, experts have estimated that around a million people in England and Wales will lose their disability benefits as part of the welfare overhaul.
An official impact assessment is expected to be published on Wednesday ahead of the Statement.
The Resolution Foundation has warned that without action, the number of children living in poverty across the UK is expected to rise to 4.6 million under the Labour government, the highest level on record.
It forecasts UK child poverty will increase from an estimated 31% in 2024-25 to 33 per cent by 2029-30, taking a further 300,000 children into poverty.
