The pound has fallen sharply as worries over the UK\u2019s bleak fiscal outlook weigh heavily before next month\u2019s closely-watched Budget.<\/p>\n
Sterling tumbled to a two-and-a-half-year low against the euro and a three-month low versus the US dollar, down 0.4% at 1.13 euros and 0.4% lower at 1.32 dollars, following steep falls on Tuesday.<\/p>\n
It comes after reports that the UK\u2019s independent fiscal watchdog, the Office for Budget Responsibility (OBR), had cut its productivity forecast \u2013 due to be unveiled in November\u2019s Budget \u2013 by 0.3 percentage points, possibly leaving the Government facing a more than \u00a320 billion hit to the public finances.<\/p>\n
Each percentage point downgrade means the Chancellor needs to find around \u00a37 billion to meet her plans.<\/p>\n
This could leave Chancellor Rachel Reeves with a gap of more than \u00a320 billion, even before paying for the expected abolition of the two-child benefit cap.<\/p>\n
Fears are building that Ms Reeves may need to renege on the Government\u2019s manifesto pledge not to raise taxes for working people as she needs to plug a gaping hole in the nation\u2019s finances, with tax hikes and spending cuts expected in the Budget.<\/p>\n
The pound\u2019s falls also come before the Bank of England\u2019s interest rate meeting on November 6, when it will publish accompanying quarterly growth and inflation forecasts.<\/p>\n
The Bank is expected to keep rates on hold at 4% in the next decision, with some economists now not forecasting a cut until 2026 as stubbornly high inflation holds policymakers back from further reductions.<\/p>\n
The Institute for Fiscal Studies (IFS) warned earlier this month that Ms Reeves could need to find \u00a322 billion of tax rises or spending cuts if she is to restore the \u00a310 billion of headroom she left herself against her debt targets in the spring.<\/p>\n
The Chancellor has said investment is key to the UK\u2019s productivity challenges (PA) <\/p>\n
Ms Reeves has been left with the gap in the public finances because of higher borrowing costs, persistent inflation and weaker growth, along with spending commitments including moves to partially reverse the cut to winter fuel payments and watering down its plans to cut welfare.<\/p>\n
But Ms Reeves insisted on Wednesday that the UK does not have to \u201caccept\u201d grim economic forecasts.<\/p>\n
Writing in the Guardian, the Chancellor admitted that productivity forecasts from the OBR may be gloomy, but that austerity, Brexit and the pandemic had left \u201cdeep scars\u201d on the UK\u2019s economy.<\/p>\n
But she said she was \u201cdetermined that we don\u2019t simply accept the forecasts but we defy them\u201d and would not \u201crelitigate the past or let past mistakes determine our future\u201d.<\/p>\n
She added: \u201cIf productivity is our challenge, then investment is our solution.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The pound has fallen sharply as worries over the UK\u2019s bleak fiscal outlook weigh heavily before next month\u2019s…\n","protected":false},"author":2,"featured_media":232066,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[59,57,58,50,50120,62058,1445,56,54,55],"class_list":["post-232065","post","type-post","status-publish","format-standard","has-post-thumbnail","category-united-kingdom","tag-gb","tag-great-britain","tag-greatbritain","tag-news","tag-office-for-budget-responsibility","tag-public-finances","tag-rachel-reeves","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/232065","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=232065"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/232065\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/232066"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=232065"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=232065"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=232065"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}