Wed, 02 Jul 2025

Wed, 02 Jul 2025 Reeves' five choices to turn government finances around

The chancellor's financial wriggle room has shrunk after welform reforms were watered down.
Option 1: Wait and see if the UK economy grows by more than expected, which is a risky move as the Office for Budget Responsibility (OBR) has halved its forecast for UK economic growth this year to 1%. Option 2: Limit the OBR's report to once a year at the Autumn Budget, as suggested by the International Monetary Fund (IMF), to promote further policy stability and reduce pressure on the government's buffer figure. Option 3: Keep a freeze on tax thresholds in place for longer, which could bring in nearly £7bn but would be a tax rise on working people if they receive pay rises. Option 4: Alter the Chancellor's self-imposed financial rules, which aim to show the UK is financially stable after the credibility-shaking mini-budget in 2022. However, this risks rattling markets and increasing debt interest payments. Option 5: Implement further tax increases or other measures to make up for the lost savings, but this would require significant changes and could be challenging due to Labour's pledge not to raise taxes for working people.
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