🔗 Share this article

Chancellor Rachel Reeves has revealed she is preparing "targeted measures to deal with cost of living pressures" in the upcoming Budget.

Speaking to the BBC, she emphasized that lowering inflation is a joint task of both the administration and the Bank of England.

The United Kingdom's inflation rate is projected to be the most elevated among the G7 advanced economies this calendar year and next.

Potential Utility Bill Interventions

Sources suggest the government could intervene to reduce utility costs, such as by cutting the present 5% level of VAT applied on energy.

Another possibility is to cut some of the policy costs currently added to household expenses.

Budgetary Constraints and Expert Predictions

The administration will obtain the latest report from the official forecaster, the Office for Budget Responsibility, on Monday, which will reveal how much scope there is for such measures.

The expectation from most analysts is that Reeves will have to declare higher taxes or spending cuts in order to meet her voluntary debt limits.

Previously on Thursday, analysis showed there was a £22 billion shortfall for the Treasury chief to fill, which is at the lower end of projections.

"It is a shared task between the central bank and the administration to continue tackling some of the drivers of inflation," Reeves stated to the BBC in Washington, at the yearly gatherings of the IMF and World Bank.

Tax Pledges and Global Issues

While a great deal of the attention has been on probable tax increases, the Treasury chief said the most recent information from the OBR had not altered her vow to election pledges not to increase tax levels on earnings tax, VAT or social security contributions.

She blamed an "uncertain world" with growing geopolitical and trade concerns for the fiscal revenue measures, likely to be directed on those "with the broadest shoulders."

Global Economic Tensions

Addressing worries about the UK's economic relations with the Asian nation she said: "Our security interests invariably take priority."

Last week's announcement by China to tighten export controls on rare earths and other materials that are key for high-technology manufacturing led US President Donald Trump to propose an further 100% tariff on goods from the Asian country, raising the prospect of an full-scale trade war between the two global powers.

The American finance chief labeled China's decision "commercial pressure" and "a global supply chain power grab."

Questioned on considering the US offer to join its battle with the Asian nation, the Chancellor said she was "extremely troubled" by Chinese measures and encouraged the Beijing authorities "to avoid restrictions and restrict access."

She said the move was "damaging for the world economy and generates further challenges."

"I believe there are fields where we need to challenge China, but there are also significant opportunities to sell into Chinese markets, including financial services and other areas of the economic system. We've got to maintain that equilibrium right."

The chancellor also stated she was cooperating with G7 counterparts "regarding our own essential resources approach, so that we are reduced dependence."

Health Service Drug Pricing and Funding

The Chancellor also acknowledged that the cost the National Health Service pays for pharmaceuticals could rise as a result of current negotiations with the US government and its pharmaceutical firms, in return for reduced taxes and capital.

A number of the biggest global pharmaceutical manufacturers have said lately that they are either halting or abandoning operations in the United Kingdom, with some attributing the insufficient payments they are getting.

Last month, the Science Minister said the cost the health service pays for drugs would have to rise to stop companies and pharmaceutical investment departing from the United Kingdom.

The Chancellor informed the BBC: "We have seen because of the payment system, that drug testing, new drugs have not been provided in the United Kingdom in the manner that they are in other continental states."

"We want to make sure that patients receiving treatment from the NHS are can obtain the top critical medicines in the globe. And so we are looking at these issues, and... seeking to obtain additional capital into the UK."