Rachel Reeves announces tough budget with cuts and tax rises

Chancellor Rachel Reeves has indicated that her first budget will involve difficult decisions, including spending cuts, tax increases, and higher borrowing. This announcement follows the release of official figures showing stagnant economic growth, with GDP growth at 0.0% in July. Reeves emphasized the need to address a significant fiscal deficit inherited from the previous government, which she described as a dire economic situation. She has ruled out raising personal income taxes, National Insurance, VAT, and corporation tax, leaving limited options for increasing revenue through other taxes on private wealth and businesses. The chancellor aims to restore stability to the economy while promoting growth, which is essential for increasing public spending within strict fiscal rules. The government is also implementing new obligations on businesses, including reforms related to workers' rights, which some industries fear may lead to increased costs. Despite these challenges, Reeves highlighted significant investments from companies like Microsoft, which are expected to create jobs in technical skills and digital infrastructure. Reeves acknowledged a £22 billion shortfall in public finances that must be addressed, stating that while the decisions made are difficult, they are necessary given the circumstances. She noted that pensioners would benefit from an increase in the new state pension, which has risen by £900 compared to the previous year, aiming to protect vulnerable groups during this period of austerity. Further cuts to public services are anticipated, with Reeves indicating that even sectors like the justice system may face reductions despite existing pressures. She remains committed to tackling the financial issues left by the previous administration, asserting that these measures are crucial for turning the economy around.