BancaMarch | The budget watchdog cut GDP forecasts for 2025 to just +1%, down from an initial +2%. In a scenario of greater economic weakness and rising borrowing costs, the British finance minister, Rachel Reeves, updated the budget in the face of the threat of breaching fiscal rules. The debt markets seemed to welcome the emphasis on fiscal responsibility. The measures involve cuts of up to £14 billion by 2029-2030.
The main reductions have been made in social spending and welfare, which will be cut by £4.8 billion (€5.7 billion). A further £3.6 billion will be cut from departmental spending and £2.2 billion from the fight against tax evasion. In addition, they have made accounting changes of £3.4 billion, largely by moving current expenditure to capital projects – exempt from the main fiscal rule. As for increased defence spending, the increase will be up to 2.5% of GDP by April 2027.
