The Budget Dilemma: Tax rises or spending cuts?

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Rachel Reeves is once again facing tough choices on tax and spending. After promising no further tax rises last autumn, the Chancellor could now see a sizeable downgrade to the borrowing outlook - enough to wipe out the limited ‘headroom’ she built into her fiscal plans last spring. To stick to her ‘iron-clad’ rules, Reeves may now need a sizeable fiscal consolidation through tax rises, spending cuts, or both.

Helen talks to IFS economists Carl Emmerson and Ben Zaranko about why we’re back here again, what’s really driving the UK’s fiscal challenges, and what options the Chancellor has to get the public finances back on track. They discuss whether Reeves can stick to her fiscal rules, what role productivity and growth forecasts play, and how the government could avoid fiscal 'ground hog' day again.

🎟️ Plus, we share details of our upcoming live recording at the British Library on 4th November, part of the ESRC Festival of Social Science. Sign up here.

This episode is part of the 2025 Green Budget, our annual report exploring the Chancellor’s options.

Zooming in: discussion questions

These are a set of questions designed for A Level economics students to discuss, written by teacher Will Haines.

1. How may the expected downgrade of productivity by the OBR impact government finances?

2. Why do governments set themselves fiscal rules?

3. Labour pledged in their manifesto not to ‘increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT’. Outline the main economic benefits and costs of maintaining this pledge in the Autumn Budget.