Rachel Reeves today played down the prospect of having to come back for more tax after her brutal Budget raids.
Speaking to business chiefs in Davos, the Chancellor tried to reassure them that no more action would be needed to shore up the public finances.
‘We will not need to do more on that front,’ she told a Bloomberg event.
‘We don’t plan any tax changes in the spring (statement), and very much hope after the headroom that we have built in through difficult decisions on tax and spending, that that provides the stability that we need every week.’
The comment has echoes of Ms Reeves’ previous promise not to increase taxes again after her monster first Budget in 2024.
Alarm has been raised that the government’s books are looking tight once more despite the £22billion ‘headroom’ Ms Reeves built up in November.
That is the leeway she had for hitting her main fiscal target, of revenues covering day-to-day spending within a three-year period.
However, some economists have suggested two-thirds of the margin might already have disappeared, due to a combination of U-turns, lower GDP growth prospects and a defence funding shortfall.
Donald Trump’s trade threats against Nato allies over Greenland have sparked concerns of fresh global turmoil, with warnings the UK faces a big hit.
Ms Reeves told Bloomberg TV: ‘I would just urge people to keep cool heads. That’s what we did all through last year and it actually served us pretty well.
Speaking to business chiefs in Davos, the Chancellor tried to reassure them that no more action would be needed to shore up the public finances
‘And whilst trade barriers are going up around the world at the moment, we can all see that, I think last year barriers to trade with the UK have fallen.’
Sitting alongside US secretary of commerce Howard Lutnick in a panel in Davos later, Ms Reeves told him Britain is America’s ‘strongest ally’.
‘You are a much bigger economy, and we can’t do everything on our own, nor should we try to, because we’d end up doing nothing well. We do have real strengths in the UK, in our defence sector, in life sciences, in business and financial services, but we do rely on our allies as well,’ she said.
‘And even a country as big and as strong as America also relies on its allies, and I guess the sort of area where I think that we do need to sort of continue that dialogue between countries that share each others’ values, is how we can work together in our mutual interests to advance our values in a very unstable and uncertain world?
‘And you know, if you say, ‘could you picture the world without the US, and what would the world be like?’ Yeah, the world would be a lot poorer, it would be a lot scarier, but you’ve also got a lot of allies around the world in the United States.
‘Britain, I know, I hope, I believe, is your strongest ally.’
Ms Reeves has moved to prevent the OBR from officially declaring whether she is meeting her fiscal rules in March – although it will give an assessment and update forecasts.
She is adamant there will be no fiscal package in March, with the next changes waiting until the Autumn.
Having notoriously broken her 2024 promise that the burden would not increase further from its record high, Ms Reeves said after the last Budget: ‘I reserve the right to be able to take action at any point.
‘But I believe the headroom that we have and the changes we have made means I won’t need to do that in the spring.
‘Of course I reserve the right at any time to take action.’
Meanwhile, the Bank of England governor Andrew Bailey said the central bank has ‘to be very alert’ of the potential impact from heightened geopolitical tensions.
Mr Bailey told MPs at Parliament’s Treasury Committee: ‘The level of geopolitical uncertainty and geopolitical issues is a big consideration, because they can have financial stability consequences.
Sitting alongside US secretary of commerce Howard Lutnick in a panel in Davos later, Ms Reeves told him Britain is America’s ‘strongest ally’
Bank of England governor Andrew Bailey said the central bank has ‘to be very alert’ of the potential impact from heightened geopolitical tensions
‘Let me put that in a bit of context in two respects. One, having said that, growth in the world economy was a lot more stable than we thought it would be.
‘The second point is about financial markets and is a fairly similar point, that we worry considerably about how markets react to those things.
‘Market reactions have actually been more muted than we would have feared and expected.
‘Overriding those points, I take neither of those as a point of assurance. We have to be very alert to these things.’