Wed, 06 Aug 2025

Wed, 06 Aug 2025 What economic levers are left for Reeves to pull?

The Chancellor Rachel Reeves is due to deliver her Budget in the autumn.

* A new forecast by Niesr suggests the UK may face a £40-50bn budget gap, significantly higher than previous estimates.
* This pessimistic analysis is being considered by the Treasury ahead of the autumn Budget, and could lead to increased flexibility for Chancellor Rachel Reeves to hit her borrowing limits.
* The current buffer against missing fiscal rules is a tight £10bn, but Niesr recommends establishing a "large buffer" to avoid prolonged economic uncertainty caused by piecemeal policy changes.
* Tax rises or spending cuts may be needed to fill the budget gap, with tax rises being the main lever available due to fixed spending and political challenges over welfare cuts.
* Potential areas for tax increases include: + Changes to VAT scope + Pension allowances + Council tax + Prolonging income tax threshold freeze
* Economic news has been mixed in recent weeks, with the Bank of England set to decide on a further interest rate cut and release new economic forecasts next week.
* GDP figures are also due to be released next week, showing the UK is no longer the fastest growing economy among major G7 countries.
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