UK government's 2025 macroeconomic objectives

Question 1

UK Govts macroeconomic objectives

Answer 1

1. Economic Growth
   Objective: Achieve sustainable and inclusive economic growth.

Recent Performance: The UK economy grew by 0.7% in Q1 2025, marking its fastest quarterly growth in a year and positioning it as the top performer among G7 nations.

Forecast: The Office for Budget Responsibility (OBR) forecasts GDP growth of 1.1% in 2024 and 1.2% in 2025.

2. Inflation Control
   Objective: Maintain Consumer Price Index (CPI) inflation close to the 2% target.

Recent Data: CPI inflation was 3.0% in January 2025, up from 2.5% in December 2024.

Forecast: The OBR expects inflation to average 2.6% in 2025, gradually returning to the 2% target in subsequent years.
GOV.UK
House of Commons Library

3. Employment and Unemployment
   Objective: Achieve high employment levels and reduce unemployment.

Recent Data: The employment rate was 75.0% in November 2024 to January 2025, up from 74.7% the previous year.

Forecast: The OBR forecasts the unemployment rate to peak at 4.4% in 2024 and 2025, then gradually fall to 4.1% in 2028.

4. Public Finances and Fiscal Responsibility
   Objective: Ensure fiscal sustainability and reduce public sector net debt.

Recent Data: Government borrowing in the financial year to February 2025 was £132 billion, £15 billion more than in the same period in 2023/24.

Forecast: The OBR projects a reduction in the general government fiscal deficit from -5.4% of GDP in 2023 to -3.7% in 2025.

Objective: Achieve a fair and equitable distribution of income and wealth.

Current Status: The UK’s Gini coefficient, a measure of income inequality, stands at 0.357, indicating a moderate level of income disparity.
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Government Actions:

The Labour government has proposed welfare reforms aiming to reduce spending by £5–6 billion, which include cuts to disability benefits and a shift towards a work-focused approach for long-term sick individuals.

These measures have sparked debates within the party and among charities, with concerns about their impact on vulnerable populations.
Wikipedia

🌍 2. Environmental Sustainability
Objective: Promote sustainable development and address climate change.

Current Status:

The UK has halved its greenhouse gas emissions relative to 1990 levels.

However, current policies and spending allocations are insufficient to meet the 2030 emissions reduction target.
IMF

Government Actions:

The government has committed to reducing emissions by 78% by 2035, including the UK’s share of international aviation and shipping emissions.

To achieve this, annual public investment in the green transition needs to increase by £5–10 billion by 2030, with a focus on incentivizing private investment.

Proposed measures include expanding the Boiler Upgrade Grant and implementing stronger incentives for the adoption of heat pumps and electric vehicles.

💱 3. Balance of Payments Stability
Objective: Maintain a stable and sustainable balance of payments.

Current Status: The UK’s current account deficit remains a concern, influenced by factors such as trade imbalances and capital flows.
The Guardian

Government Actions:

The Labour government has been focusing on boosting exports and attracting foreign investment, particularly in sectors like technology and clean energy.

Recent trade agreements with the United States and India aim to enhance trade relations, though challenges such as existing tariffs and global economic uncertainties persist