On 26 March, the Chancellor of the Exchequer Rachel Reeves will deliver her Spring Statement alongside the latest economic forecast from the Office for Budget Responsibility (OBR).
Below, PwC specialists explore what could be the focus of the speech.
Barret Kupelian, chief economist at PwC UK, said:
“Weaker growth, worsening public finances, and higher debt costs have reduced the Chancellor’s post Autumn Budget room for manoeuvre.
“We expect the OBR to say the economy is growing slower than expected (c.1% vs the previous expectation of 2% for this year), leading to worse public finance outcomes and higher than expected debt-servicing costs.
“This means that the ‘headroom’for day-to-day spending has gone and that the Chancellor will need to course correct. The Chancellor has always been clear that this Spring Statement is not a Budget, and will be led by spending controls, not tax hikes. We do not expect her to change tack now.
“Some of these details have already appeared in the public domain, including expected cuts to current spending, particularly on the welfare bill. Though controversial, this move will help curb current or day-to-day spending. Some of the cuts to international aid may also be repurposed for capital spending on defence, a move that ticks the box on the Treasury’s rulebook while signalling strategic intent.
“We don’t expect any cutbacks to the supply side agenda though. With economic inactivity still elevated, investing in the NHS is not just good politics—it’s a labour market lever. Reduce waiting times, and you improve the odds of getting people back to work.”
Rachel Taylor, government and health industries leader at PwC, said:
“All eyes will be on how the Chancellor navigates the fiscal restraints of public spending versus the need to supercharge economic growth. Without a concerted effort to unlock public-private investment there is a handbrake on economic growth in the UK.
“Close collaboration between Government and business is required to incentivise a greater level of private investment to drive forward growth priorities, including those in a future Industrial Strategy. This must be accompanied by a shift in the regulatory environment, where the Government has already taken some steps forward, but more can still be done to make the UK a more attractive place for business investment.”
For further anlaysis of the Spring Statement and our experts reactions to the speech and OBR forecast, visit our Spring Statement webpage.
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