When Rachel Reeves went out to sell her £40bn tax-raising budget on the airwaves, she offered a message of reassurance: ‘We don’t need to come back and ask for more.’ The Chancellor suggested that last month’s fiscal event would be the one and only big budget – she was making the tough decisions early on so the Labour government wouldn’t have to keep coming back and asking for more. However, as ministers get their heads around the incoming Trump presidency, doubts are growing as to whether Reeves will be able to stick to her pledge.
The problem is twofold. First, borrowing costs. If Donald Trump is true to his word on imposing tariffs on UK exports to the United States, it could have a negative effect on growth – which is already looking anaemic on recent projections. The Labour government will look to win an exemption (but in doing so could find themselves having to pick a side between the US and EU).
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