Unexpected growth in the UK economy has done little to mask the deepening hole in Britain’s public finances, and with an autumn budget looming, Chancellor Rachel Reeves faces mounting pressure to find solutions that will both repair public services and keep the books balanced. On August 15, 2025, experts debated a range of possible measures Reeves might take, each with its own set of risks and political calculations. As the government weighs its next moves, the Department for Work and Pensions (DWP) is also rolling out new rules and a sweeping crackdown on benefit fraud, adding further complexity for claimants and taxpayers alike.
One of the most straightforward—yet politically fraught—options on the table is raising income tax. According to Maha Rafi Atal, Adam Smith Senior Lecturer in Political Economy at the University of Glasgow, even a modest 1% increase in the basic rate could generate as much as £8 billion for the Treasury. Atal points out the dilemma Reeves faces: Labour’s promises to fix public services, reduce immigration, and avoid income tax hikes are mutually conflicting. Economic growth, so vital for boosting tax revenues without raising rates, is hampered by tighter migration policies that constrain key sectors like finance, higher education, and the creative industries. Raising other taxes, such as employer national insurance, risks stifling business growth. With borrowing costs much higher than during the last Labour government, Reeves may soon have to choose between breaking her tax pledge or allowing further cuts to public services. Polls suggest the public would rather see higher taxes than further deterioration of essential services, but the political cost of such a move is never easy to swallow.
Another lever under consideration is inheritance tax (IHT) reform. Conor O'Kane, Senior Lecturer in Economics at the University of Bournemouth, notes that Labour might look at changes to IHT thresholds and rules around gifting, especially as property values have soared in recent years. Adjusting these rules could help raise revenue, but comes with significant political baggage. The 2024 autumn budget saw cuts to tax breaks for farmers passing on their businesses, sparking fierce criticism and protests. Any move to tighten IHT could be branded a “death tax” by opposition parties, tapping into anxieties about taxing aspiration and family wealth. Economically, the returns from IHT changes are uncertain, given the potential for loopholes and avoidance. Still, Labour could frame such reforms as progressive, making those who have benefited most from rising property values contribute a little more.
For those seeking a less visible approach, extending the freeze on income tax thresholds is a likely option. Steve Schifferes, Honorary Research Fellow at City St George’s University, points out that the current freeze is already projected to bring in £40 billion a year by 2028. Extending it to 2029-30 could add another £7-8 billion annually. Because it’s a continuation of an existing policy, the true impact on household incomes is less immediately obvious, making it easier to defend politically—despite breaking the spirit of Labour’s income tax pledge. Unlike wealth taxes, threshold freezes are tough to dodge, and their effects accumulate quietly over time.
Yet another potential source of revenue lies in cutting back on pension tax reliefs, a measure that could be both lucrative and more equitable. Jonquil Lowe, Senior Lecturer in Economics and Personal Finance at the Open University, highlights that pension tax reliefs cost the government £52 billion in 2023-24, with about two-thirds of the benefits flowing to higher-rate taxpayers. Critics argue these reliefs disproportionately benefit the better-off, particularly men, as women’s ability to save is often limited by unpaid care work. While some claim tax reliefs are necessary to encourage saving for retirement, Lowe points to evidence that the real boost in UK pension saving came from the introduction of auto-enrolment in 2012, not tax breaks. Restricting higher-rate reliefs could help close the fiscal gap while addressing social justice concerns.
Beyond tax tweaks, some experts advocate for a bold investment strategy to stimulate growth and outpace the fiscal deficit. Guilherme Klein Martins, Lecturer in Economics at the University of Leeds, argues for a “modern golden rule” enshrining a minimum of 3% of GDP for net public investment. According to international evidence, every 1% of GDP invested in public projects can boost output by around 1.5% over a few years. By focusing on infrastructure, healthcare, education, and sectors where the UK has competitive potential—like clean energy, life sciences, and advanced manufacturing—the government could spur productivity and, ultimately, raise tax receipts. Martins suggests regular publication and oversight of investment projects to maintain discipline and transparency, with scrutiny from the Office for Budget Responsibility.
While policymakers debate these high-level fiscal strategies, ordinary Britons—especially pensioners and benefit claimants—are facing new rules and heightened scrutiny. On August 16, 2025, the DWP reminded Pension Credit recipients that they must promptly report any changes in personal or financial circumstances, or risk having their payments stopped, reduced, or even facing penalties. Changes that must be declared range from moving house and changes in partnership status to hospital stays, variations in income, and shifts in savings or benefits. The DWP warns, “You could be taken to court or have to pay a penalty if you give wrong information or do not report a change in your circumstances.” Pension Credit currently tops up weekly income to £227.10 for singles and £346.60 for couples, but failing to keep the DWP updated can result in repayment demands or legal action. The helpline operates weekdays from 8am to 6pm for those unsure about their obligations.
Meanwhile, the UK Government is preparing to implement what it calls “the biggest fraud crackdown in a generation” within the welfare system. Announced on August 14, 2025, the Public Authorities (Fraud, Error and Recovery) Bill aims to save taxpayers £1.5 billion over five years, with the first measures rolling out in April 2026. New powers include driving bans of up to two years for persistent benefit fraudsters, the ability for the DWP to seize funds directly from offenders’ bank accounts, and a new Eligibility Verification system. This system will see third parties such as banks flagging potentially fraudulent claims—though the DWP will not have direct access to individuals’ bank accounts or spending data. Instead, banks will alert the DWP if someone appears to exceed eligibility thresholds, like the £16,000 income limit for Universal Credit.
To ensure the new powers are used fairly and effectively, the government will adopt a “test and learn” approach, working with stakeholders and publishing detailed guidance. The reforms include safeguards, reporting mechanisms, and oversight to prevent abuse. The Bill also gives the Public Sector Fraud Authority new powers of entry, search, and seizure, aiming to take the fight to organized crime and reduce the burden on police. The government hopes these measures will deter fraud, recover public funds, and restore confidence in the welfare system.
As the autumn budget approaches and new anti-fraud measures come into force, both policymakers and the public face tough choices. Whether through tax rises, investment, or tighter welfare enforcement, the UK is grappling with how best to secure its financial future while protecting those who depend on public support. The coming months will test the government’s ability to balance fiscal discipline with social responsibility—and the outcome will shape Britain’s economic and social landscape for years to come.
