Chancellor Rachel Reeves has blamed a heavier-than-anticipated blow from Brexit and austerity for her decision to take action to balance the books in next month's budget. Speaking at an investment event in Birmingham, she said leaving the European Union was causing more damage than official forecasters had previously outlined.
Reeves hinted that the Office for Budget Responsibility (OBR) is likely to downgrade growth forecasts sharply. “The OBR, I think, are going to be pretty frank about this – that things like austerity, the cuts to capital spending and Brexit have had a bigger impact on our economy than was even projected back then,” she stated.
The chancellor's comments come as UK inflation is expected to rise to 4% in September, double the government's 2% target. She is keen to announce measures at the budget to bear down on prices, and will chair a cabinet meeting on Thursday to discuss what each department can do to tame inflation.
Reeves is widely expected to announce a package of tax increases and spending cuts on 26 November in response to a shortfall in government finances that could reach £40bn. The OBR's downgraded forecasts are understood to be fuelled by a stark reassessment of Britain's productivity growth.
“That is why we are unashamedly rebuilding our relations with the EU to reduce some of those costs, that in my view were needlessly added to businesses since 2016,” Reeves said. She expressed determination to turn around the economy through growth and productivity improvements.
