A delicate balancing act

In her first Budget in October 2024, Rachel Reeves promised that there would only be one ‘fiscal event’ each year – she would not make significant tax changes more frequently. As she repeatedly said during her Spring Statement, the world changes rapidly: economic and political events can disrupt the forecasts that measure her compliance with her self-imposed fiscal rules. The decision to increase defence spending, reductions in expected economic growth, the risk of US tariffs and rising borrowing costs had combined to remove the ‘headroom’ that had allowed her to predict that she would balance the books by 2030. If she was determined to keep to the fiscal rules, she would have to close that gap; but if she raised taxes, she would break the promise of just one fiscal event each year. Read on