Rachel Reeves, the UK’s Chancellor of the Exchequer, is facing mounting scrutiny and speculation over the state of Britain’s public finances as the countdown to the autumn Budget, set for November 26, 2025, intensifies. But Reeves, in a series of pointed interviews and public statements this week, has firmly rejected claims that the nation is staring down a £50 billion 'black hole'—or that it could be forced to seek a bailout from the International Monetary Fund (IMF), as some critics have warned.
Speaking to the BBC on September 3, Reeves dismissed the dire warnings, saying, “A lot of them are talking rubbish, and frankly, a lot of what they’re saying is irresponsible.” She was responding to reports from independent think tanks, notably the National Institute of Economic and Social Research (Niesr), and commentary in The Telegraph suggesting that Britain’s combination of rising borrowing costs and welfare spending could push the country toward an IMF rescue—a scenario not seen since the 1970s.
Reeves was unequivocal: “I don’t accept that, and I think most serious economists don’t accept that either.” She criticized Niesr’s recent estimate of a £50 billion gap in the public finances, noting, “Niesr had more than most got their numbers wrong in the last few years.” Niesr, for its part, declined to comment further on its forecast.
The Chancellor’s pushback comes as the cost of long-term government borrowing in the UK hit a 27-year high this week, exacerbating concerns that Reeves will have no choice but to hike taxes or cut spending to meet her self-imposed fiscal rules. These rules, which she has repeatedly labeled as “non-negotiable,” require that day-to-day government costs be paid by tax income—rather than borrowing—by 2029-30, and that debt falls as a share of national income by the end of this parliament, also in 2029-30.
Forecasts for how much money Reeves needs to find to meet these targets vary widely. While Niesr’s figure sits at £50 billion, other estimates hover around £25 billion. Either way, the pressure is on. Treasury insiders, according to The Telegraph, have signaled that the scale of any new tax increases will depend heavily on whether the Office for Budget Responsibility (OBR) endorses Labour’s planning reforms and trade deals with the US, EU, and India as credible drivers of economic growth. The OBR has been reviewing Britain’s long-term growth prospects throughout the summer, and officials fear a downgrade could blow an even bigger hole in the public finances.
Reeves, however, remains adamant that she will “get the balance right” in the upcoming Budget. “Working people and businesses can rest assured, I know how important it is to return growth in investments to our economy and I will do that in the Budget this year,” she told the BBC.
Despite Labour’s pre-election pledge not to increase taxes on “working people”—a category that includes VAT, National Insurance (NI), and income tax—Reeves did raise employer NI contributions in last year’s Budget, a move that drew backlash from the business community. The British Chambers of Commerce (BCC) has since warned that such tax increases are pushing up prices and dragging on the economy. “The forthcoming autumn Budget will be a pivotal moment. The Chancellor faces some tough decisions as more tax rises risk severely undermining sentiment and investment even further,” David Bharier at the BCC told The Telegraph.
Further complicating matters, the government has performed U-turns on proposed welfare cuts and winter fuel payments, putting additional strain on the search for alternative revenue streams. Some Labour MPs are now campaigning for increased spending to alleviate child poverty, specifically by reversing the two-child benefit cap. Meanwhile, a review of disability benefits, led by Work and Pensions Minister Stephen Timms, is expected soon after the latest welfare policy reversals.
Rumors have swirled that Reeves is considering tax hikes on property, banks, and even the public, but she has been quick to shoot down such speculation. “People who seem to know what is in the Budget before we have made those decisions are just wrong,” she told the BBC. “It’s up to me to decide what is in the Budget, and I will do that in a careful way, getting the balance right between making sure that we’ve got enough money to fund our public services, particularly our National Health Service, whilst also ensuring that we can bring growth and investment to Britain.”
Still, government insiders have not denied that tax rises are on the table. Economists believe Reeves will need to raise at least £20 billion, with a focus on protecting “working people” while targeting wealth. Sources also signaled that higher gambling levies are likely, following a consultation on replacing various betting and gaming duties with a single tax rate. Property taxes could rise, and stealth tax increases on working people have not been ruled out.
Reeves is also banking on growth-boosting measures to help square the circle. She is expected to announce plans to cut red tape and accelerate major infrastructure projects, including a revival of the Northern Powerhouse rail scheme and fast-tracked approvals for data centers. The hope is that these moves, along with new trade deals, will persuade the OBR to project stronger growth, thereby reducing the need for harsh fiscal measures.
Financial markets have been jittery in recent days. After a sharp sell-off, the pound recovered slightly against the dollar and euro on September 3. Nonetheless, Britain’s long-term borrowing costs remain at their highest since 1998. Analysts at Capital Economics, as cited by The Telegraph, warned that high inflation is turning the UK into the “sick man” of the bond market, with borrowing costs rising faster than in the US or France over the past month.
Andrew Bailey, Governor of the Bank of England, has added to the uncertainty. He told MPs that Reeves’s National Insurance increase continues to depress the jobs market, and cast doubt on the prospect of imminent interest rate cuts. “Although I think the path will continue to be downwards gradually over time because policy is still restrictive, there is now considerably more doubt about exactly when and how quickly we can make those further steps,” Bailey said.
Despite these headwinds, Reeves insists that the UK’s borrowing costs have “moved in line with other countries,” pointing to global pressures affecting the US and Europe as well. “There are global pressures on borrowing costs. You can see that around the world, from the United States to Europe and beyond. We’re not immune to those,” she said.
As the Budget date approaches, all eyes are on the OBR’s early October assessment, which will help set the tone for Reeves’s fiscal decisions. The Chancellor, for her part, has made it clear that her fiscal rules are here to stay. There was speculation she might allow herself a bit more wiggle room by tweaking the rules to permit a margin of 0.5% of GDP, but Reeves reiterated on Wednesday that her fiscal rules are “non-negotiable.”
With political pressure mounting and economic uncertainty swirling, Reeves faces a high-wire act in November. The choices she makes will not only define her own tenure but could shape the economic fortunes of millions across Britain for years to come.