Rachel Reeves has dismissed talk of a “£50 billion black hole” in the public finances and described speculation over tax rises as “irresponsible”.
After confirming the budget will take place on 26 November, as reported by Daily Business on Tuesday, she insisted in an interview that she is in charge of delvering structural reform that will lead to growth.
Concerning the new recruits in the Prime Minister’s office, she said: “I will make the decisions in lockstep with Number 10.”
Scotland’s Finance Secretary Shona Robison said the late UK Budget “makes it incredibly difficult for the Scottish Government to undertake the detailed financial planning needed to bring forward our own budget in the usual timescale.
“It is highly unlikely that the Scottish Government will be able to bring forward our Budget and spending review before Christmas. Given the short period available before Parliament dissolves in March, it is incredibly unhelpful that the initial parliamentary scrutiny will likely be delayed into January.”
Tonight the Chancellor has been offered some relief by the British Chambers of Commerce which has raised its growth forecast this year to 1.3% from 1.1%, though this is supported by higher public spending that economists say will have to be cut.
The BCC expects GDP to slow slightly in 2026 to 1.2%, before rising to 1.5% in 2027 – unchanged from the previous forecast.
It says that given a pick-up in inflation, “further reductions in the interest rate are unlikely” – leaving the base rate at 4% by the end of 2025.
Only two cuts are projected next year due to the persistence of price rises. The interest rate is expected to fall to 3.5% by the end of 2026 and then remain there to the end of 2027.
The improvement in growth is unlikely to be enough to convince markets that Ms Reeves will not be required to take drastic action in November.
Dan Coatsworth, investment analyst at AJ Bell, said: “The Budget is always an important date in the calendar for investors, but this year’s event has the potential to cause monster movements on financial markets depending on what Reeves says.
“As it stands, the potential for tax increases might not be enough to fill the black hole in the public finances. Spending cuts might also be required.
“Bond markets have grown tired of Reeves just chipping away at the edges – going big at the Budget might get a round of applause by financial markets, even if the public might not have the same reaction.”
The BCC survey reveals that construction will be the best performing sector this year, growing by 1.5%, revised up from 0.8%. Services are forecast to grow by 1.3%, and manufacturing by 1%.
Business investment across 2025 is projected to be 1.6% – a significant downgrade from 4.8% in the last forecast.
David Bharier, head of research at the BCC, said: “Our latest forecast underlines the difficult reality facing UK businesses – and shows that economic growth is stuck in first gear.
“Huge uncertainties remain as firms assess the impact of NICs increases, new employment regulations, and yet more trade barriers.”
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