RACHEL Reeves has put cuts to asylum spending at the “top of the list” to help plug the nation’s finances, Treasury sources say.
The Chancellor has her eyes set on wasteful spending across Whitehall as she grapples with a financial black hole of up to £30 billion.
Asylum spending crackdown is a top priority for the Chancellor as she looks to fill financial blackhole of around £30 billion[/caption]
The cost of operating the asylum system was £5.4 billion in 2023. Plans to end asylum hotels by 2029 is set to save £1 billion a year.
Ms Reeves paved the way for tax rises next month by this week saying global events and long-term damage to the economy have made her choices harder to make.
She received the first forecast from the independent watchdog yesterday (Fri) who are expected to downgrade productivity levels.
The move could put a dent in her financial cushion of up to £18 billion giving the Chancellor a huge headache ahead of November’s Budget.
Higher debt interest and a u-turn on £5 billion on welfare cuts after a Labour rebellion will add to costs.
The forecasts from the Office for Budget Responsibility will change as she tells them of planned tax changes and asks them to bake in bonuses of trade deals with the US, EU and India.
A Treasury source said: “We aren’t going to give a running commentary on the OBR’s forecasts.
“There is a lot of rubbish out there from people who claim to know what is in the Budget before decisions have been made. The Chancellor will make those decisions—no one else.
“For years we have been saying that stagnant productivity has been holding working people back and that there is too much wasteful spending in government—with asylum spending at the top of the list. We are getting on with tackling that.”
Meanwhile, 85 per cent of business leaders are concerned that a tax raising Budget will have a negative impact on their firms.
Forty-six per cent of businesses will let more staff go and 70 per cent of firms will award fewer wage increases or promotions if taxes are hiked.
The results come from the inaugural Business Confidence Barometer with 74 per cent demanding the Chancellor prioritise tax cuts alongside spending cuts to grow the economy.
It comes after business was hit by a £25 billion national insurance tax raid at the last Budget.
Martin Beck, Chief Economist at WPI Strategy, said, “The UK economy’s fundamentals, particularly strong household and corporate balance sheets, aren’t as dismal as many suggest.
“This is borne out in the fairly optimistic picture revealed in our policy barometer of business leaders.
“However, with tax rises in the Budget seemingly inevitable, it is important that the Chancellor does not choke off growth by discouraging firms from expanding, investing and hiring.”
Scarlett Maguire, Founder, Merlin Strategy, said, “Whilst business confidence has been more resilient than many might think, they are nonetheless anxious about the upcoming Budget.
“Businesses have already been making cuts to wages and staff and are now urging the Chancellor to prioritise tax cuts to help drive growth.”
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