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Home |Latest news |Chancellor has set herself a 'fiscal trap' ahead of Spring Statement

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Chancellor has set herself a 'fiscal trap' ahead of Spring Statement

March 07 2025

Chancellor Rachel Reeves has set herself a trap with self-imposed fiscal rules that could force her into tax hikes and deeper spending cuts as the economy deteriorates, the Institute for Fiscal Studies (IFS) has warned.

The Chancellor's rules around borrowing have left Britain's economic policy 'entirely exposed' to global changes and could force her into major tax and spending decisions at this month's Spring Statement, the IFS said.

The Treasury has committed to delivering only one major fiscal event a year but the prospect of missing her own targets at the first hurdle could see Ms Reeves intervene earlier, it added.

Matthew Oulton, Research Economist at the IFS, said: 'Rachel Reeves has engineered a trap for herself, albeit in difficult circumstances. Aiming to meet inflexible, pass–fail fiscal targets by the slimmest of margins was a risky strategy from the outset.

'It was always possible that economic conditions would deteriorate, put her on track to miss those rules, and push her into making tax and spending changes at what isn't supposed to be a fiscal event later this month. 'This scenario is far from guaranteed and she could still get lucky. But if not, she will have to choose between her fiscal rules and her commitment to holding only one fiscal event per year.'

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