The Rest Is Money 217. Is Reeves To Blame For The Budget Hole?
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Oct 19, 2025 Helen Miller, Director of the Institute for Fiscal Studies and an expert in public finance, shares insights on the UK's challenging budget landscape. She discusses the need for rational tax reform and how Rachel Reeves can avoid raising taxes next year. Helen highlights the importance of a solid fiscal buffer and suggests reforming capital gains to incentivize investment. Additionally, she argues for a fairer council tax system and revaluation. Their conversation touches on how better long-term planning can reassure markets without cutting vital benefits.
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The Fiscal Triple Threat
- The UK faces a rare fiscal trio: weak long-run growth, high debt near 100% of GDP, and large refinancing needs that squeeze the Chancellor.
- That combination forces tight choices between restoring market confidence and supporting growth.
Running With Tiny Fiscal Headroom
- Rachel Reeves inherited a difficult position but chose minimal fiscal headroom, increasing the risk that routine forecast downgrades force tax rises.
- Small buffers magnify normal forecast revisions into political and market crises.
Uncertainty Costs More Than Numbers
- Investors and businesses respond to policy uncertainty, not just headline buffers, so tight rules and political constraints raise borrowing costs and dent investment.
- Uncertainty amplifies borrowing costs and suppresses business investment.