RACHEL Reeves has admitted she is looking at both tax rises and spending cuts in the budget after being shown the size of the black hole she must fill.
The Chancellor blamed Brexit, austerity and the Liz Truss mini-budget for having all “weighed heavily” on Britain’s economy as she prepares to deliver her second budget on November 26.
It comes as the Tories told Ms Reeves she is “killing growth and crushing jobs” as the unemployment rate hit a four-year high.
She told Sky News this morning: “Of course, we’re looking at tax and spending as well.”
Ms Reeves was shown the first draft of the Office for Budget Responsibility’s (OBR) report on October 3, highlighting the scale of her task to meet her fiscal rules.
The Chancellor – who arrived in Washington DC yesterday for the annual meeting of the IMF – has never previously publicly confirmed tax rises are on the cards.
And Cabinet ministers had indicated in the past they didn’t expect spending cuts.
Asked about the country being in an economical “doom loop”, Ms Reeves said: “Nobody wants that cycle to end more than I do.”
She is expected to have to find up to £30billion at the budget to balance the books.
This comes after a U-turn on winter fuel and welfare reforms, as well as a major productivity downgrade by the OBR.
Yesterday the IMF upgraded UK growth projections by 0.1 percentage points to 1.3% of GDP this year.
It also shrunk its forecast by 0.1% next year at 1.3%.
“I was really clear during the general election campaign – and we discussed this many times – that I would always make sure the numbers add up,” Ms Reeves said today.
Referring to the work ahead, she said she “won’t duck those challenges”.
Unemployment rate
The unemployment rate hit 4.8 per cent in the three months to August, which was up from 4.7 per cent in the previous quarter.
Critics pointed to the national insurance rise this year, making it riskier for bosses to hire staff.
Shadow Welfare Secretary Helen Whately said: “The only thing growing under Labour is the unemployment queue and the national debt.
“Labour has killed growth and crushed jobs and livelihoods, with families paying the price.”
UK families will suffer the highest inflation in the G7 this year and next, according to warnings from the International Monetary Fund.
Prices will rise 3.4 per cent this year, up from 3.2 per cent forecast in July, the IMF predicted yesterday.
Next year inflation is tipped to ease to 2.5 per cent, again up from the previously predicted 2.3.
The target is two per cent.
And retail experts warn food inflation will even hit six per cent by the end of the year.
