Chancellor faces economic 'doom loop' risk, warns ex-BoE chief

UK Chancellor Rachel Reeves is under increasing pressure as government borrowing surged to £17.8 billion in December, significantly above forecasts and the previous year. With a total borrowing of £129.9 billion for the first nine months of the financial year, the Chancellor may have to consider tax hikes or spending cuts to adhere to her fiscal rules. Former Bank of England chief economist Andy Haldane warns that cutting government spending could lead to a 'doom loop' of reduced growth and worsening fiscal conditions, emphasizing the importance of investment. He cautioned against hastily implementing spending cuts, stating it could counteract economic recovery efforts. The government is expected to outline potential spending reductions in March, as it seeks to address the challenging public finance situation. Haldane remains optimistic that the economic outlook could improve later in the year despite current stagnation.