🔗 Share this article

Treasury head Rachel Reeves has revealed she is preparing "specific steps to tackle cost of living challenges" in the upcoming Budget.

Speaking to media outlets, she noted that reducing price rises is a collective duty of both the government and the Bank of England.

The UK's inflation rate is projected to be the most elevated among the G7 developed nations this calendar year and next.

Potential Energy Cost Measures

It is understood the government could intervene to lower energy bills, for instance by cutting the present 5% level of VAT charged on energy supplies.

Another approach is to lower some of the regulatory levies presently included in bills.

Fiscal Limitations and Expert Predictions

The government will receive the latest assessment from the official forecaster, the OBR, on Monday, which will clarify how much space there is for these measures.

The expectation from the majority of experts is that Reeves will have to announce tax increases or spending cuts in order to meet her voluntary debt limits.

Earlier on the same day, analysis indicated there was a £22bn deficit for the Treasury chief to fill, which is at the more modest range of forecasts.

"It is a shared task between the central bank and the administration to bear down further on some of the drivers of inflation," the Chancellor told reporters in Washington, at the conferences of the IMF and global financial institution.

Revenue Commitments and Global Concerns

While a great deal of the attention has been on likely tax rises, the chancellor said the latest data from the OBR had not changed her commitment to campaign commitments not to raise rates on income tax, VAT or social security contributions.

She attributed an "unpredictable world" with rising geopolitical and trade concerns for the Budget revenue measures, probably to be targeted on those "wealthiest."

Global Economic Tensions

Commenting on concerns about the UK's commercial links with the Asian nation she said: "Our security interests always take priority."

Recent statement by China to increase trade restrictions on critical minerals and other materials that are key for high-technology production led US President Donald Trump to threaten an further 100% import tax on goods from the Asian country, raising the risk of an all-out commercial conflict between the two global powers.

The American finance chief labeled the Chinese decision "economic coercion" and "a global supply chain control attempt."

Asked about considering the US offer to join its battle with the Asian nation, Reeves said she was "deeply worried" by China's measures and called on the Beijing authorities "to avoid restrictions and restrict access."

She said the action was "harmful for the global economy and generates additional challenges."

"In my view there are sectors where we need to challenge China, but there are also significant opportunities to trade with China's economy, including banking sector and other areas of the economic system. We've got to achieve that equilibrium right."

The chancellor also confirmed she was working with international partners "regarding our own critical minerals plan, so that we are less reliant."

NHS Drug Pricing and Funding

Reeves also acknowledged that the price the National Health Service pays for drugs could increase as a result of current negotiations with the Trump administration and its pharmaceutical firms, in return for reduced taxes and funding.

Some of the biggest global pharmaceutical manufacturers have said in recent statements that they are either delaying or scrapping operations in the UK, with some attributing the modest returns they are obtaining.

Last month, the Science Minister said the price the NHS pays for medicines would must go up to stop companies and pharmaceutical investment leaving the United Kingdom.

Reeves told the BBC: "It has been observed as a result of the pricing regime, that clinical trials, innovative medicines have not been offered in the United Kingdom in the way that they are in other continental states."

"We want to ensure that people getting care from the National Health Service are able to receive the best life-saving medicines in the globe. And so we are reviewing all of that, and... seeking to attract increased investment into the UK."