Chancellor Rachel Reeves should 'rethink' her 'peculiar' fiscal plan, urges former NatWest boss

22 April 2025, 20:24 | Updated: 22 April 2025, 20:33

Sir Howard Davies has told LBC that Rachel Reeves should “rethink” her “peculiar” fiscal plan - and could borrow more.

The former NatWest Group Chairman's comments come following news that the IMF has slashed the UK's growth forecast.

The UK economy is predicted to grow by 1.1% this year, 0.5 percentage points less than January’s forecast.

This is partly reflecting President Trump's tariffs, as well as weaker consumption amid higher inflation driven by bills and energy price hikes.

Speaking to Andrew Marr, Sir Howard said the Chancellor needs to "rethink" her fiscal plan "because it's a peculiar one".

He said: "It's focused on debt falling in year four to five of the forecast period. And I think if the economy goes further downhill, and the IMF says the risks are on the downside, which seems quite right to me, then I think it would be wrong to offset that by trying to cut public spending even further or increase taxes further."

Sir Howard told LBC that while the IMF's numbers are bad, he doesn't think we should so gloomy.

He said: "The IMF's growth forecast has come down to what the Office of Budget Responsibility's growth forecast was and also, if you look at what the IMF is saying in relation to the rest of Europe, they see that the UK is growing slightly faster than France, Germany or Italy. So, we're not uniquely in a mess here."

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Sir Howard continued to say that "this is just the same bad news as [Reeves] had to deal with three or four weeks ago".

He added: "Don't panic would be my first point. People are bound to look at the IMF, because it has its profile that it has, although I don't think its forecasts are actually that great if you look at it historically, but it is saying it's going to be low."

Andrew asked whether the Chancellor could afford to borrow a little more if she has to, Sir Howard said he thinks she could.

He said: "I think that if you say, look, the world is going to hell in a hand basket as a result of these eccentric policies to which the world is having to adjust, and therefore for us to go further and tighten fiscal policy further in response to this would be a bad thing to do.

"And the IMF indeed itself refers to the need for greater European investment in infrastructure to offset some of these trade effects."