Rachel Reeves spending review ‘set to be next big challenge’ for government as growth flatlines
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Rachel Reeves has ordered a line-by-line review of spending, with departments ordered to find savings of 5 per cent of their budgets. Rachel Reeves has been warned that there are more challenges to come in 2025, as the chancellor gears up for her spending review amid flatlining economic growth.
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Carl Emmerson, deputy director of the Institute for Fiscal Studies (IFS), said the multi-year spending review, expected to be published in June, will be a “very big challenge” for the government after economic growth in the UK stalled. She has ordered a line-by-line review of spending, with departments ordered to find “efficiency savings” of 5 per cent of their budgets.
The latest Office for National Statistics figures showed the economy contracting by 0.1 per cent in October following a similar fall in September – the first time gross domestic product has shrunk in two consecutive months since the pandemic hit in March and April 2020.
Meanwhile, growth from July to September was revised down from 0.1 per cent to zero by the ONS and living standards fell. The Bank of England is also now expecting zero GDP growth between October and December. The Office for Budget Responsibility’s forecast is for gross domestic product (GDP) to grow 2 per cent in 2025, but a Treasury-compiled list of independent forecasters showed an average of just 1.3 per cent growth in their latest estimates for 2025, something which could hit the public finances with lower-than-expected tax receipts and increased costs.
