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Home Business and Economics Economics

UK faces £100 billion black hole in public finances over next five years – Reeves

The upcoming budget will be presented as a longer-term down payment on “fixing the foundations” of the country.

Jack Peat by Jack Peat
2024-10-16 09:04
in Economics
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Rachel Reeves has warned that the UK faces a £100 billion black hole in the public finances over the next five years as she prepares to deliver her first budget as chancellor.

At a meeting of the political cabinet, the chancellor said the £22 billion gap this year – which the government has blamed on their poor economic inheritance from the Tories – would be a recurring cost each year of this parliament.

A Labour spokesperson said the scale of inheritance meant there would have to be “difficult decisions on spending, welfare, and tax” – and that the long-term priority had to be unlocking private sector investment to drive economic growth.

Nearly 38,000 UK jobs are set to be created across the UK after a total of £63 billion of investment was announced around Monday’s International Investment Summit.

The record-breaking total figure more than doubles the £29.5 billion committed at last year’s Global Investment Summit and spans partnerships across the infrastructure and tech sectors, including over a billion pounds in new investments announced today by DP World, Associated British Ports (ABP) and Imperial College London.

But there is likely to be more short-term pain for long-term gain before the books get balanced.

Treasury sources say the £22 billion sum was a conservative estimate of the amount of money needed to cover the cost of areas including public sector pay, support for Ukraine and the asylum system..

The downbeat assessment came with a warning that “this is not a budget for rabbits”, with government aides trying to manage expectations of what the chancellor will be able to deliver in her long-awaited first fiscal statement.

Instead, the budget will be presented as a longer-term down payment on “fixing the foundations” of the country, as the government uses all the levers at its disposal to grow the economy.

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🚨The Chanellor has told the cabinet the UK faces a £100bn black hole in the public finances over next five years

In other news Bloomberg has calculated that Brexit is costing the UK £100bn a year in lost output

Surely now is the time to discuss this? https://t.co/qSYSlyF6GR

— Peter Stefanovic (@PeterStefanovi2) October 15, 2024

Related: Elon Musk draws on the Bible to defend British Empire’s role in the slave trade

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