BoE heaps woe on Rachel Reeves with bleak warning over UK growth prospects as she tries to appease Labour MPs with affordable housing plan ahead of ‘£15bn’ cuts in brutal Spring Statement_Nhy
The Bank of England has heaped woe on Rachel Reeves with a bleak warning over UK growth prospects ahead of the Spring Statement.
The Chancellor is bracing to wield the axe on spending at the fiscal event tomorrow – with £15billion of cuts expected as she desperately tries to balance the books.
The government has unveiled £2billion in grant funding to deliver up to 18,000 new homes in England this morning, as Ms Reeves tries to cool Labour anger at ‘austerity’ moves to slash benefits.
Stalling growth and rising debt interest costs – plus looming fears of a Donald Trump trade war – have wreaked havoc with Ms Reeves’ plans from the Autumn Budget.
She must fill hole in the public finances that could be as much as £15billion, even after proposals were unveiled to cut £5billion off welfare.
That will have to come from lower spending as Ms Reeves has ruled out tax rises at this stage.
Speaking at Leicester University last night, Bank of England governor Andrew Bailey said the UK faced ‘strong headwinds’ in securing growth (file picture)
The government has unveiled £2billion in grant funding to deliver up to 18,000 new homes in England this morning, as Rachel Reeves (pictured on a visit with Angela Rayner) tries to cool Labour anger at ‘austerity’ moves to slash benefits
Although overall budgets are still expected to rise in real terms overall in the coming years, unprotected departments will be exposed to cuts.
Speaking at Leicester University last night, Bank of England governor Andrew Bailey said the UK faced ‘strong headwinds’ in securing growth.
Tomorrow the Treasury’s OBR watchdog is expected to follow Threadneedle Street’s example by halving economic forecasts for this year.
Mr Bailey stressed the need to overhaul the way UK plc works and take advantage of AI advances.
‘We face a necessary challenge to raise the potential growth rate of the economy. There are strong headwinds,’ he said.
‘The combination of technology and trade remains an essential route to increasing productivity.’
He said AI is the technology most likely to ‘move the needle’ on growth, and played down fears that it would replace significant swathes of the population’s jobs, comparing the technology to the industrial revolution.
There was ‘no doubt transitional pain and suffering at the time’ back then, he said, but it ‘did not lead to mass unemployment, and I do not believe this will be the case with AI’.
He was speaking after the Bank voted to hold interest rates at 4.5 per cent last week, as policymakers warned that uncertainty over trade had intensified following new US tariffs.
Borrowing figures on Friday showed £132billion was racked up in the year to February – £20.4billion more than the Treasury’s OBR forecast as recently as October
Eight members of the Bank’s nine-person Monetary Policy Committee (MPC) voted to keep rates on hold earlier in March while they assess the impact of economic developments around the world.
Mr Trump has imposed tariffs on UK and EU steel and aluminium imports, as well as on Canada, China and Mexico in recent weeks, leading to a wave of retaliatory tariffs around the world.
The MPC said there were risks to the economic outlook for the UK, and uncertainties about how the policy changes could affect inflation.
