Chancellor Rachel Reeves has ruled out adopting “tax and spend” policies, making it clear that she will neither raise taxes nor increase government budgets in her crucial Spring Statement next week.
Speaking in a documentary, The Making of a Chancellor, Reeves also cautioned that the government could not afford the kind of public spending rises seen under the previous Labour government.
She is expected to announce cuts to some government departments on Wednesday, with additional funding for defence already secured by reducing the aid budget.
“We cannot simply tax and spend our way to improved living standards and better public services. That is not an option in today’s economic climate,” she said.
Growing fiscal challenges
In her autumn Budget, Reeves implemented significant tax and public spending increases, predominantly funded through additional taxes on businesses—a move that sparked controversy.
However, she now faces mounting pressure on multiple fronts. It was revealed on Friday that government borrowing—the gap between spending and tax revenue—was even higher than anticipated in February.
The Office for Budget Responsibility had projected borrowing for that month to be £6.5 billion, but the actual figure surged to £10.7 billion, leaving the chancellor with reduced fiscal flexibility.
Adding to her challenges, official economic growth forecasts are also expected to be downgraded.
Last week, Work and Pensions Secretary Liz Kendall unveiled significant reforms to the benefits system aimed at saving £5 billion annually by 2030 and promoting a more “pro-work” welfare model. However, ministers have yet to detail the precise breakdown of expected savings.
These changes will impact those receiving disability and health benefits, as well as young people under 22 who rely on top-up payments while on Universal Credit. Reeves is set to outline the impact of these reforms further in her Spring Statement, where she is also expected to announce additional cuts to certain Whitehall departments to ensure her economic rules are upheld.
The Treasury has reiterated that these fiscal rules—preventing borrowing for day-to-day public spending and ensuring debt reduction as a proportion of the UK economy by 2029-30—are “non-negotiable.”
Balancing priorities
“What I have done so far is invest in public services,” Reeves emphasised in the documentary.
She noted that while there is “real growth” in government spending over the next few years, it is not at the levels seen under the last Labour administration when economic growth was much stronger.
However, Labour grandee Lord Blunkett has urged Reeves to “relax the self-imposed fiscal rules,” describing them as “Treasury orthodoxy and monetarism at its worst.”
Speaking to The Week in Westminster on Saturday, the former Work and Pensions Secretary under Tony Blair suggested increasing the spending cap by at least £10-15 billion to support “a new deal for the unemployed,” aiming to get 500,000 young jobseekers into employment or training programmes.
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Facing criticism
Reeves addressed growing concerns among Labour MPs regarding welfare changes and opened up about her tenure so far, which has been marked by controversy—not only over policy decisions but also questions about the accuracy of her CV.
When asked whether she had been treated fairly compared to her male predecessors, Reeves responded: “That is for others to judge, and for people to evaluate over time.
“I recognise that with the privilege of holding this position comes intense scrutiny. I firmly believe that every policy I introduce, every pound of taxpayers’ money that I allocate or collect, must be rigorously examined. That is part of the responsibility of the job.
“One of the hardest aspects, even with the thick skin I have developed over the past 14 years, is dealing with personal criticism, as that is not the kind of politics I engage in.”
Opposition response
Responding to Reeves’ stance on the economy, Shadow Chancellor Mel Stride said: “The Labour Chancellor promised ‘growth, growth, growth’, but since the Budget, growth has stalled, inflation has risen, and business confidence has collapsed.
“Labour is now being forced to deliver an emergency Budget on Wednesday—a crisis entirely of their own making.
“Rachel Reeves must urgently reconsider her anti-business policies.”
