🔗 Share this article

Chancellor Rachel Reeves has stated she is preparing "focused measures to deal with cost of living pressures" in next month's financial statement.

In comments to the BBC, she noted that reducing inflation is a shared duty of both the administration and the central bank.

The UK's inflation rate is expected to be the highest among the Group of Seven developed nations this calendar year and next.

Possible Energy Cost Measures

Sources suggest the administration could take action to bring down utility costs, for instance by slashing the current 5% rate of VAT applied on energy.

A further possibility is to lower some of the government charges currently added to household expenses.

Budgetary Constraints and Expert Predictions

The administration will obtain the next report from the independent fiscal watchdog, the Office for Budget Responsibility, on the start of the week, which will clarify how much room there is for these measures.

The view from the majority of economists is that the Chancellor will have to announce tax increases or spending cuts in order to fulfill her declared fiscal targets.

Earlier on Thursday, analysis showed there was a £22bn deficit for the Treasury chief to fill, which is at the lower end of forecasts.

"There's a shared job between the central bank and the government to bear down further on some of the causes of inflation," Reeves stated to the BBC in Washington, at the yearly gatherings of the IMF and World Bank.

Tax Pledges and International Issues

While a great deal of the attention has been on expected tax rises, the chancellor said the latest information from the fiscal watchdog had not altered her pledge to campaign commitments not to raise tax levels on income tax, VAT or social security contributions.

She blamed an "uncertain global environment" with increasing geopolitical and trade tensions for the Budget tax moves, likely to be targeted on those "most able to pay."

Global Trade Tensions

Commenting on apprehensions about the United Kingdom's trade ties with China she said: "Our national security always take priority."

Recent statement by Chinese authorities to tighten export controls on rare earths and other materials that are essential for high-technology production led US President Donald Trump to suggest an additional 100% import tax on goods from China, increasing the risk of an all-out trade war between the two economic giants.

The American finance chief described China's action "economic coercion" and "a international production control attempt."

Asked about accepting the US offer to join its conflict with China, Reeves said she was "extremely troubled" by China's measures and called on the Beijing authorities "not to put up barriers and limit trade."

She said the move was "bad for the international commerce and generates additional headwinds."

"I believe there are sectors where we should confront China, but there are also valuable prospects to trade with Chinese markets, including banking sector and other sectors of the economy. We've got to achieve that equilibrium correct."

The Treasury chief also confirmed she was collaborating with international partners "on our own critical minerals plan, so that we are more independent."

Health Service Medicine Pricing and Investment

The Chancellor also acknowledged that the price the National Health Service pays for medicines could rise as a result of current negotiations with the Trump administration and its pharmaceutical firms, in return for lower tariffs and capital.

Some of the world's largest pharmaceutical manufacturers have said in recent statements that they are either halting or abandoning investments in the United Kingdom, with several attributing the low prices they are getting.

Last month, the government science advisor said the cost the NHS pays for medicines would must rise to halt firms and drug research funding departing from the United Kingdom.

Reeves stated to the BBC: "It has been observed as a result of the payment system, that clinical trials, recent pharmaceuticals have not been offered in the UK in the manner that they are in other EU nations."

"We want to make sure that people receiving care from the National Health Service are able to obtain the top critical medicines in the world. And so we are looking at this situation, and... looking to obtain additional funding into the UK."