🔗 Share this article

Chancellor Rachel Reeves has revealed she is preparing "focused action to deal with cost of living challenges" in the upcoming Budget.

During an interview with media outlets, she stated that lowering price rises is a joint task of both the government and the central bank.

The United Kingdom's inflation rate is expected to be the highest among the Group of Seven advanced economies this year and next.

Potential Energy Bill Interventions

It is understood the administration could take action to lower energy bills, for example by reducing the present 5% level of VAT applied on energy supplies.

Another option is to reduce some of the government charges currently added to bills.

Budgetary Constraints and Expert Expectations

The government will receive the latest assessment from the independent fiscal watchdog, the Office for Budget Responsibility, on Monday, which will reveal how much room there is for these actions.

The expectation from the majority of economists is that Reeves will have to announce tax rises or expenditure reductions in order to adhere to her voluntary debt limits.

Earlier on the same day, calculations suggested there was a £22bn shortfall for the chancellor to fill, which is at the more modest range of projections.

"It is a joint job between the Bank of England and the government to bear down further on some of the drivers of inflation," the Chancellor told the BBC in the US capital, at the conferences of the International Monetary Fund and World Bank.

Tax Pledges and International Issues

While a great deal of the attention has been on expected tax rises, the Treasury chief said the most recent information from the OBR had not altered her commitment to manifesto promises not to increase rates on income tax, sales tax or social security contributions.

She attributed an "uncertain world" with rising geopolitical and commercial issues for the fiscal tax moves, likely to be targeted on those "with the broadest shoulders."

Global Economic Tensions

Referring to apprehensions about the United Kingdom's trade ties with China she said: "The UK's security interests always take priority."

Recent declaration by Chinese authorities to increase export controls on rare earths and other resources that are crucial for high-technology manufacturing led American leader Donald Trump to suggest an additional 100% tariff on imports from the Asian country, raising the risk of an full-scale commercial conflict between the two global powers.

The US Treasury Secretary called the Chinese move "commercial pressure" and "a global supply chain power grab."

Asked about accepting the US offer to join its conflict with the Asian nation, the Chancellor said she was "extremely troubled" by Chinese measures and called on the Chinese government "not to put up barriers and limit trade."

She said the decision was "damaging for the international commerce and causes further obstacles."

"It is my opinion there are sectors where we should challenge Chinese policies, but there are also valuable opportunities to trade with China's economy, including banking sector and other sectors of the economic system. We've got to achieve that equilibrium appropriate."

The chancellor also affirmed she was working with international partners "regarding our own essential resources strategy, so that we are less reliant."

Health Service Drug Costs and Funding

The Chancellor also admitted that the price the NHS pays for medicines could go up as a result of current talks with the Trump administration and its pharmaceutical firms, in return for lower tariffs and funding.

A number of the biggest global pharmaceutical manufacturers have said recently that they are either delaying or abandoning investments in the UK, with several blaming the low prices they are getting.

Recently, the government science advisor said the cost the health service spends on medicines would must go up to prevent companies and drug research funding leaving the United Kingdom.

The Chancellor informed media: "We have seen as a result of the pricing regime, that drug testing, recent pharmaceuticals have not been offered in the United Kingdom in the extent that they are in other EU nations."

"Our aim is to guarantee that people receiving care from the National Health Service are able to obtain the finest critical medicines in the globe. And so we are reviewing these issues, and... looking to obtain additional investment into the UK."