🔗 Share this article

Chancellor Rachel Reeves has stated she is planning "specific measures to tackle cost of living challenges" in the forthcoming financial statement.

During an interview with media outlets, she noted that lowering price rises is a collective responsibility of both the administration and the Bank of England.

The UK's price growth is projected to be the highest among the Group of Seven developed nations this calendar year and next.

Possible Utility Cost Interventions

Sources suggest the government could intervene to lower utility costs, for example by slashing the current 5% level of VAT applied on energy.

An additional option is to cut some of the policy costs presently included in household expenses.

Fiscal Constraints and Analyst Expectations

The government will obtain the latest draft from the independent fiscal watchdog, the Office for Budget Responsibility, on the start of the week, which will reveal how much room there is for these actions.

The consensus from the majority of analysts is that the Chancellor will have to announce higher taxes or budget cuts in order to adhere to her self-imposed fiscal targets.

Previously on the same day, calculations indicated there was a £22bn gap for the Treasury chief to address, which is at the lower end of projections.

"There's a shared responsibility between the central bank and the government to continue tackling some of the drivers of inflation," Reeves stated to the BBC in Washington, at the annual meetings of the IMF and World Bank.

Revenue Commitments and International Issues

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

She attributed an "unpredictable world" with rising international and trade concerns for the fiscal revenue measures, probably to be focused on those "most able to pay."

International Economic Tensions

Referring to concerns about the United Kingdom's economic relations with China she said: "Our security interests invariably are paramount."

Last week's announcement by China to increase trade restrictions on rare earths and other materials that are essential for advanced tech production led American leader the US President to propose an extra 100% import tax on goods from China, raising the prospect of an all-out commercial conflict between the two largest economies.

The US Treasury Secretary labeled China's move "economic coercion" and "a international production control attempt."

Questioned on considering the American proposal to join its battle with the Asian nation, the Chancellor said she was "extremely troubled" by China's actions and called on the Chinese government "to avoid restrictions and restrict access."

She said the action was "bad for the world economy and creates additional obstacles."

"I believe there are sectors where we must challenge China, but there are also important opportunities to trade with China's economy, including financial services and other areas of the economy. We've got to achieve that equilibrium correct."

The chancellor also stated she was working with G7 counterparts "regarding our own essential resources plan, so that we are more independent."

NHS Drug Pricing and Funding

The Chancellor also admitted that the price the NHS pays for drugs could increase as a result of ongoing talks with the Trump administration and its drugs companies, in return for lower tariffs and funding.

Some of the biggest global pharmaceutical manufacturers have said recently that they are either halting or abandoning operations in the UK, with some blaming the low prices they are obtaining.

Recently, the Science Minister said the cost the health service pays for medicines would must go up to stop firms and pharmaceutical investment leaving the UK.

The Chancellor stated to the BBC: "It has been observed because of the pricing regime, that drug testing, innovative medicines have not been available in the UK in the extent that they are in other European countries."

"Our aim is to make sure that individuals receiving care from the NHS are able to receive the top critical drugs in the globe. And so we are looking at this situation, and... aiming to secure increased capital into Britain."