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Sir Keir Starmer suffered an uprising of the cabinet due to the planned reduction of well -being and other public consumption, but the Prime Minister insisted that the “difficult choices” were needed and told MPs that he would not bend British fiscal rules to enable greater borrowings.
Government insiders say ministers have caused concern about reducing the cabinet meeting two days ago, and most protested them because of the planned reduction in consumption in their own departments.
But the ministers also marked concern about planned reduction of well -being, for which Starmer says they are needed reform the “independent” systemwhich he claims to leave many people trapped in conveniences.
The Prime Minister told his colleagues that he was well aware of the anger for the proposed cuts, and his spokesman did not deny that numerous ministers had expressed concern on Tuesday.
One government insider said he was a “minority” of those who attended the meeting, but added that there was a solid support to adherence to Chancellorine Rachel Reeves’ fiscal rules.
“There were a lot of support for fiscal rules, but not for difficult elections in the fields of politics of individual ministers,” one government official told the Financial Times. Bloomberg was first reported by ministerial unrest.
Reeves is determined to go through a reduction in well -being, which officers of work say they could save up to £ 6 billion a year. The plans submitted the budget responsibility to the Office.
The fiscal guard will have to evaluate how the reforms were “achieved” on the eve of the development of the final fiscal forecasts in the Reeves Spring Statement on March 26.
Starmer warned the Labor MPs that the British fiscal rules would not be relaxed to prevent painful cuts of well -beingDespite the increasing pressure of the party that the UK follows Germany in the involvement of borrowing faucets.
Prime Minister agreed with Reeves If the British fiscal rules must be obeyed, and any relaxation of self -exposed limit limit would be the market and increase the costs of borrowing.
“The markets are still testing us,” said a senior government official. “The decisions we make come under considerable supervision.”
The German decision to hide its rules for the financing of defense and infrastructure projects has increased the pressure on Reeves to look at its rules again, which require to balance current consumption with tax incomes by 2029-30.
Anneliese Dodds, who gave up a foreign minister of development last month to reduce the budget for help, said Starmer in her resignation letter that she “expected to talk collectively about our fiscal rules and approaches to taxation, as other nations do.”
Reeves ordered a budget reduction to help finance the increase in defense costs from 2.3 percent of GDP to 2.5 percent in 2027. She said her fiscal rules were “uncertain”.
John McDonnell, a former Chancellor of the Shadow, told the Financial Times that the rules “have to relax”. He said that Reeves’ limitations demand that he cut more than the law on well -being than the conservatives planned.
Other main work MPs, many of whom have been invited to Downing Street in recent days to get acquainted with the planned reduction of well -being, say that a discussion of fiscal rules has been widespread within the party.
One said: “The reduction of well -being is difficult for the Labor MPs, which is the most difficult thing we asked to swallow. Talk about relaxing fiscal rules are subject to and prepare to break the surface.”
One Starmer ally said that if Britain follows Germany in relaxing its fiscal rules, Subsequent increase in borrowing costs in the UK The markets imposed would be punished.
One said: “Germany has a debt ratio and a GDP of 62 percent, while ours is about 95 percent. There are obvious differences.”
The Downing Street Presentation on the reduction of well -being was led by Claire Reynolds, Starmer’s boss of connections with the parliamentary Labor Party. MPs who are usually loyal “are really, really angry,” said that one participant who believed that the number 10 could “soften” on some measures.
Economists say that Reeves’s plan for public finances has naturally blew a combination of growing borrowing costs and slow growth, and some expect to reduce consumption or increase tax by at least £ 10 billion in her spring statement.
In October, she allowed herself 9.9 billion pounds of her head against her fiscal rule, but she is considered to be deleted. The reduction of well -being and other consumption reductions are planned to give the chancellor a pillow against further bad news.
Nicolas Trindade, a senior portfolio manager at AXA’s Investment Management Arm, warned Reeves “cannot continue to manage the economy with only £ 10 billion,” adding: “It just doesn’t work and it will only have the same problem again and again.”
Any move to release the fiscal rules that have been changed since October would be poorly received on the market, investors said. Concerns of greater borrowing in the UK combined with the sale of global bonds for taking in the UK 10-year borrowing costs up to a 16-year maximum of 4.93 percent in January.
With just under 4.7 percent on Thursday, they remain an almost percentage point above the place where they were in mid -September, and at the levels comparable to those achieved at the height of the market crisis after the unfortunate “mini” budget of Conservatives 2022.
“The Treasury in the UK is caught in a relationship,” said James Smith, an British economist from I ING. “Higher debt interest costs mean painful consumption reduction on a spring statement on March 26. Now they look inevitable. And the further increase in taxes looks more and more likely later in the year. “
