The chancellor cannot hide for ever from her big political choice

23rd March 2025

Paul Johnson writing for the Times and reproduced at Institute for Fiscal Studies.

Rachel Reeves gives herself so little room for manoeuvre that she creates costly uncertainty when the choice is obvious: raise taxes or cut spending.

"What's in a name? That which we call a rose by any other name would smell as sweet." Perhaps the chancellor is contemplating Romeo and Juliet as she prepares for her spring forecast. Or is it a spring statement. Or a budget?

Officially it is merely a forecast; Rachel Reeves pledged to keep to just one fiscal event a year. The Office for Budget Responsibility is legally required to prepare two sets of forecasts within each fiscal year, and the second set of forecasts was to be all that she would present this spring.

A fine intention. But the chances that she'll stand up next Wednesday and do only that look increasingly remote. She may call it a spring forecast, but it will likely smell rather more like a budget.

Reeves's problem is that, last October, she proclaimed her desire for three potentially inconsistent things at once. She wanted to keep to her "ironclad" fiscal rules, to avoid a second fiscal event, and also to borrow right up to the maximum allowed by her own rules. Had things gone her way, she might just have got away with it.

Sadly, things have very much not gone her way. In fact, pretty much everything has moved in the wrong direction. The Bank of England, and most other forecasters — which were already generally less optimistic than the OBR — have cut their growth forecasts. Gilt yields have risen. Tax revenues have disappointed and borrowing this year looks set to come in noticeably above the October forecast.

Now, there are lots of moving parts when it comes to predicting future borrowing levels, and it is not certain that the OBR will say that we are on track to miss current budget balance in 2029-30. But that looks much more likely than not, which means Reeves will be missing her ironclad and non-negotiable fiscal rules. What will give?

Read the full article HERE