Rachel Reeves Faces £4.4 Billion Deficit, Tough Budget Choices Ahead

British Finance Minister Rachel Reeves is set to face a £4.4 billion ($5.7 billion) deficit in her budget, reversing a previous surplus projection, according to the Resolution Foundation. The think tank warned that weaker economic growth and higher interest rate expectations have worsened the UK’s financial outlook, with the Office for Budget Responsibility expected to cut its 2025 growth forecast significantly. The Bank of England has already slashed its projection to 0.75%, mirroring the Resolution Foundation’s prediction.

With Reeves’ budget update scheduled for March 26, she is under pressure to meet fiscal rules that require balancing public spending with tax revenues by 2030. However, experts caution against deep welfare cuts and suggest tax increases instead. The rising cost of government borrowing, largely influenced by U.S. economic policies under President Donald Trump, has added to Britain’s fiscal strain. The Resolution Foundation urged Reeves to act decisively while ensuring that lower-income households are not disproportionately affected.

Prime Minister Keir Starmer and Reeves had pledged during last year’s election not to raise income tax, value-added tax, or corporate tax rates. One potential revenue-boosting measure could be extending the current freeze on income tax thresholds until 2030, which would generate billions. However, with fiscal pressures expected to intensify, experts warn that ruling out tax increases entirely could make future budgets even harder to balance.

Pic Courtesy: google/ images are subject to copyright