Rachel Reeves in a Budget Black Hole … Only Huge Tax Rises Will Fill It
4th October 2025
It was the moment of truth. On Friday Rachel Reeves was handed a double-sided sheet of A3 containing the Treasury’s assessment of the first official forecasts from the Office for Budget Responsibility.
Like her predecessors the chancellor’s instinct will have been to turn the page and look for the figure on the very bottom right-hand corner — the number that will ultimately determine the fate of her budget and potentially the entire government.
That figure is known as the “fiscal headroom” — effectively the amount of money the government has left after its tax and spending plans are taken into account. And Reeves is heading for negative territory. Economists believe that to make the numbers add up she will have to find as much as £30 billion, precipitating the need for huge tax rises in the budget.
This is what happens in a country that still has some contact with fiscal responsibility. In the U.S., of course, we just print more money and pretend it doesn’t matter.