🔗 Share this article

Chancellor Rachel Reeves has stated she is preparing "targeted action to tackle cost of living issues" in next month's financial statement.

Speaking to the BBC, she noted that curbing inflation is a shared task of both the administration and the Bank of England.

The United Kingdom's inflation rate is forecast to be the most elevated among the Group of Seven industrialized countries this calendar year and the following year.

Potential Utility Bill Interventions

Sources suggest the government could take action to reduce energy bills, for example by cutting the current 5% level of value-added tax applied on energy supplies.

A further possibility is to lower some of the policy costs presently included in bills.

Budgetary Limitations and Expert Expectations

The administration will receive the next draft from the independent fiscal watchdog, the OBR, on the start of the week, which will reveal how much scope there is for these measures.

The view from most experts is that Reeves will have to declare tax rises or spending cuts in order to fulfill her self-imposed debt limits.

Previously on Thursday, estimates showed there was a £22bn deficit for the Treasury chief to address, which is at the lower end of forecasts.

"There's a joint task between the central bank and the government to bear down further on some of the drivers of price increases," the Chancellor told the BBC in the US capital, at the annual meetings of the IMF and global financial institution.

Tax Commitments and International Concerns

While a great deal of the focus has been on likely tax rises, the chancellor said the latest information from the OBR had not changed her vow to election pledges not to raise rates on income tax, VAT or National Insurance.

She blamed an "uncertain global environment" with increasing geopolitical and trade concerns for the fiscal tax moves, likely to be directed on those "wealthiest."

International Economic Disputes

Commenting on concerns about the UK's economic relations with China she said: "The UK's security interests always take priority."

Last week's statement by China to increase trade restrictions on rare earths and other materials that are key for high-technology manufacturing led US President Donald Trump to propose an extra 100% import tax on goods from China, increasing the possibility of an all-out commercial conflict between the two global powers.

The US Treasury Secretary called China's decision "economic coercion" and "a global supply chain control attempt."

Questioned on accepting the American proposal to participate in its dispute with the Asian nation, Reeves said she was "very concerned" by China's actions 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 additional challenges."

"In my view there are sectors where we should confront Chinese policies, but there are also significant chances to trade with Chinese markets, including banking sector and other sectors of the economy. We've got to achieve that balance right."

The Treasury chief also confirmed she was cooperating with other major economies "regarding our own essential resources approach, so that we are less reliant."

Health Service Medicine Costs and Funding

The Chancellor also recognized that the cost the National Health Service spends on drugs could increase as a consequence of current negotiations with the Trump administration and its drugs companies, in return for reduced taxes and funding.

A number of the biggest global drug companies have said recently that they are either delaying or canceling operations in the UK, with some attributing the insufficient payments they are getting.

Recently, the Science Minister said the cost the NHS pays for medicines would have to go up to halt firms and pharmaceutical investment leaving the UK.

Reeves informed the BBC: "We have seen because of the pricing regime, that clinical trials, recent pharmaceuticals have not been provided in the United Kingdom in the manner that they are in other European countries."

"We want to ensure that patients receiving treatment from the National Health Service are can receive the top essential treatments in the world. And so we are looking at these issues, and... looking to obtain additional investment into Britain."