UK Finance Minister, Rachel Reeves has mentioned that the government intends to stick to its fiscal rules, even in the face of economic strains. In her comments to the media on Sunday, she mentioned the importance of fiscal responsibility.
Reeves had initially promised to balance day-to-day government spending with tax revenue by the end of the decade. However, slow economic growth and rising borrowing costs have complicated it. Fears of a global trade war, caused by United States President Donald Trump’s import tariffs, have also clouded the international economic outlook.
The British government has already introduced welfare cuts totaling £5 billion ($6.5 billion) annually to meet its fiscal targets. The minister will announce further steps to give herself 10 billion pounds of room for maneuvering in her Spring Statement on Wednesday.
UK Finance Minister pushes targeted spending costs
Responding to questions about potential spending cuts, Reeves also covered more ground, noting that public spending would still grow faster than inflation. However, she added that spending should be allocated to certain priorities, including defense, which has received budget increases amid Trump’s demands that European allies do more to ensure security on the continent.
To cut spending, the UK Finance Minister wants to cut 10,000 civil service jobs and reduce government running costs by 15%. This will save about 2 billion pounds ($2.58 billion) annually. While acknowledging the fight to overcome more than a decade of economic stagnation, she stressed changes made to the economy. She also mentioned that she will follow rules that may not require new taxes, suggesting she may scrap the £1 billion-a-year digital services tax to strike a deal with President Trump and avoid tariffs in trade.
The United Kingdom government has been ramping up efforts to push through economic challenges by making room to reduce the country’s economic growth forecasts and fiscal commitments. While Trump is still thinking about tariffs, Reeves has tried to ensure Britain is at least spared the worst of it. She noted that the UK does not have a large trade surplus with the U.S., so it is less likely to be on the receiving end of protectionist policies.
One of the sticking points in the current trade discussions is the UK’s Digital Services Tax (DST), which is currently paid by large tech companies, including Google, Amazon, and Facebook. It raises roughly £800 million a year but has been a major sticking point in relations with the U.S. government. The UK is reportedly looking into the likelihood of scrapping or amending the tax to preserve strong trade ties with Washington. Reeves said discussions were continuing but did not say changes were imminent.