UK’s Reeves Plans to Boost Budget Buffer – The Telegraph

UK Chancellor Rachel Reeves is planning to build a larger fiscal buffer in next month’s budget to better shield public finances from potential future shocks, The Sunday Telegraph reported.

In her Spring Statement in March, Reeves said her spending and tax plans would leave a £9.9 billion ($13 billion) fiscal cushion against her primary rule of balancing day-to-day spending with tax revenues by 2030.

Since then, however, government borrowing costs have risen faster than expected, a plan to save £5 billion a year on welfare spending has been scrapped, and the UK’s budget watchdog has signaled it may downgrade its growth forecasts.

Economic think tanks now expect Reeves will need to raise around £30 billion in new taxes in the November 26 budget.

According to Treasury sources cited by The Telegraph, Reeves is now considering a larger buffer to protect public finances from volatility in bond markets and rising borrowing costs.

This raises the likelihood that she may need to either increase taxes further or cut spending to achieve that goal. Reeves has already announced £40 billion in tax hikes last year, which she has ruled out repeating in full.

Any move to expand the buffer would likely be welcomed by economists and think tanks, who have warned that narrow fiscal margins often fuel speculation about future tax hikes or spending cuts during the twice-yearly fiscal rule assessments, adding pressure on the economy.

When asked about the possibility of a larger buffer, a Treasury spokesperson said Reeves’s fiscal rules have helped keep interest rates lower while prioritizing investment to support long-term growth.

“This is a responsible choice,” the spokesperson said, “to reduce borrowing over the coming years so we can spend less on debt repayment and more on public services and the priorities of working people.”

(Exchange rate: $1 = £0.7486)