🔗 Share this article

Treasury head Rachel Reeves has revealed she is planning "focused action to tackle cost of living pressures" in the forthcoming Budget.

In comments to media outlets, she stated that lowering inflation is a collective task of both the administration and the Bank of England.

The United Kingdom's price growth is forecast to be the most elevated among the Group of Seven industrialized countries this year and the following year.

Possible Energy Cost Interventions

Sources suggest the government could intervene to lower energy bills, for example by slashing the present 5% level of value-added tax charged on energy supplies.

An additional possibility is to lower some of the regulatory levies presently included in bills.

Budgetary Limitations and Expert Predictions

The government will receive the latest assessment from the official forecaster, the Office for Budget Responsibility, on Monday, which will clarify how much space there is for these actions.

The consensus from most analysts is that Reeves will have to announce higher taxes or budget cuts in order to adhere to her declared fiscal targets.

Earlier on Thursday, analysis showed there was a £22bn shortfall for the Treasury chief to resolve, which is at the more modest range of forecasts.

"There's a collective responsibility between the Bank of England and the government to bear down further on some of the drivers of inflation," the Chancellor stated to reporters in Washington, at the yearly gatherings of the IMF and World Bank.

Revenue Commitments and Global Issues

While a great deal of the attention has been on probable tax rises, the chancellor said the latest data from the fiscal watchdog had not altered her pledge to campaign commitments not to raise tax levels on earnings tax, sales tax or social security contributions.

She attributed an "uncertain world" with growing international and trade issues for the Budget tax moves, likely to be targeted on those "wealthiest."

International Trade Tensions

Addressing apprehensions about the UK's economic relations with the Asian nation she said: "The UK's security interests always take priority."

Last week's declaration by Chinese authorities to strengthen export controls on rare earths and other materials that are crucial for high-technology manufacturing led American leader the US President to suggest an extra 100% import tax on goods from the Asian country, increasing the risk of an all-out trade war between the two largest economies.

The US Treasury Secretary called the Chinese move "economic coercion" and "a global supply chain power grab."

Asked about accepting the American proposal to join its battle with China, Reeves said she was "very concerned" by Chinese actions and called on the Chinese government "to avoid restrictions and limit trade."

She said the action was "damaging for the world economy and causes further headwinds."

"In my view there are fields where we need to challenge Chinese policies, but there are also important opportunities to export to Chinese markets, including financial services and other sectors of the economic system. We've got to achieve that equilibrium correct."

The chancellor also stated she was working with other major economies "regarding our own critical minerals plan, so that we are less reliant."

NHS Drug Costs and Funding

The Chancellor also admitted that the price the National Health Service pays for medicines could increase as a consequence of current discussions with the US government and its drugs companies, in return for lower tariffs and capital.

Some of the biggest global drug companies have said recently that they are either pausing or scrapping operations in the UK, with several blaming the low prices they are receiving.

Last month, the Science Minister said the cost the NHS pays for drugs would need to rise to prevent companies and drug research funding leaving the UK.

The Chancellor stated to media: "We have seen because of the pricing regime, that clinical trials, recent pharmaceuticals have not been offered in the UK in the manner that they are in other continental states."

"Our aim is to ensure that people getting treatment from the NHS are can obtain the top life-saving medicines in the world. And so we are looking at all of that, and... seeking to attract more capital into Britain."