LONDON: The UK government halved its 2025 growth forecast on Wednesday as it made billions of pounds of spendings cuts to shore up the public purse in the face of economic headwinds.
The Spring Statement spending update came as the Labour government, elected in July after a landslide election win, faces sluggish economic growth and rising borrowing costs.
Britain’s economy is expected to grow by just one percent this year, revised down from an estimate of two percent made in late October when Labour presented its inaugural budget.
However, the Office for Budget Responsibility, the UK’s spending watchdog, upgraded the country’s growth forecast for the three following years.
“Our task is to secure Britain’s future in a world that is changing before our eyes,” finance minister Rachel Reeves told parliament in the highly-anticipated update.
Concerns over US tariffs and the war in Ukraine have added to the UK’s economic woes, chipping away the government’s fiscal cushion.
“The threat facing our continent was transformed when (Russian President Vladimir) Putin invaded Ukraine,” Reeves said.
She added that “the job of a responsible government is not simply to watch this change, this moment requires an active government”.
Prime Minister Keir Starmer recently pledged to hike spending on defence, with the government Wednesday confirming a £2.2-billion ($2.8 billion) boost next year.
To avoid deepening the deficit, Reeves has cut disability welfare payments and government departmental budgets, blaming a period of heightened uncertainty in global markets.
Outside parliament Wednesday about 200 protestors, many using wheelchairs, chanted “fund welfare not warfare”, noted an AFP journalist.
The centre-left government hopes contested cuts to disability welfare payments will help it save billions annually by the end of the decade.
Comments