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2025-10-31 16:12:28
[Stallion Weakens: Downgraded UK Productivity Forecasts Raise Tax Hike Risk] ⑴ The pound continued to weaken against major currencies on Friday (October 31). The pound performed poorly this week as investors worried that Chancellor of the Exchequer Rachel Reeves might face a political backlash in the budget to be announced in late November due to escalating fiscal risks. ⑵ The UK Office for Budget Responsibility recently predicted that overall productivity in the country may decline by 0.3%, a scenario expected to widen the budget deficit to £21 billion by the 2029-2030 fiscal year. ⑶ This situation has exacerbated market concerns that Chancellor Reeves may be forced to break self-imposed fiscal rules, potentially further weakening household confidence. Analysis suggests that the government already faces a £22 billion funding gap, which can only be filled by increasing borrowing or raising worker taxes. ⑷ Choosing either a single or combined solution would result in the Chancellor reneging on her explicit promises – the Labour Party pledged in its election manifesto not to increase income tax, National Insurance tax, or worker VAT, and explicitly stated that it would not rely on borrowing to maintain daily public spending.
