Chancellor Rachel Reeves faces mounting pressure ahead of the November 26 Autumn Statement, with the Institute for Fiscal Studies recommending a £50 billion fiscal buffer to stabilize the UK economy. The think tank suggests this could require a 4 percentage point increase in all income tax rates or the main VAT rate.
The IFS argues in its annual Green Budget report that the government needs a safety margin equivalent to 1.4 per cent of GDP to avoid constant policy tightening. Helen Miller, IFS Director, stated there was a «strong case» for rebuilding fiscal credibility now: «That wouldn't be costless - but nor is limping from one forecast to the next under constant speculation that policy will be tightened again,» she said.
IFS economist Ben Zaranko described the current situation as critical: «This is a bad place to be. The speculation and uncertainty that comes with it can be economically damaging. Policy choices got us here, and policy choices could get us out.» The UK economy showed limited growth in the third quarter, with businesses reporting subdued demand and higher operating costs leading to postponed hiring and investment decisions.
Business Concerns
The CBI business lobby group noted uncertainty is holding back investment: «Many businesses reported subdued demand and higher operating costs. And firms are choosing to sit tight on hiring and investment until there's more clarity on the policy outlook.» Fergus Jimenez-England from the National Institute of Economic and Social Research emphasized that restoring business confidence requires the government to set aside a larger fiscal buffer.
Separately, budget discussions include pressure on older homeowners to downsize and "free up family homes," potentially linked to inheritance tax and stamp duty changes. Critics argue this narrative deflects from the government's failure to meet building targets, with only 231,300 net additional homes delivered in England between July 2024 and September 2025 - just 15 per cent of the 1.5 million target.
A Treasury spokesperson responded: «We have seen the fastest growth in the G7 since the start of the year, but for too many people our economy feels stuck. Working day in, day out without getting ahead. The chancellor is determined to turn this around by helping businesses in every town and high street grow, investing in infrastructure and cutting red tape to get Britain building.»
Note: This article was created with Artificial Intelligence (AI).
