London
A major British think-tank has warned that Finance Minister Rachel Reeves must introduce large tax increases in her upcoming November 26 budget to avoid a financial crisis similar to the one that forced former Prime Minister Liz Truss to resign in 2022.
The National Institute of Economic and Social Research (NIESR) said Reeves needs to create a £30 billion safety margin against future economic shocks—triple the £10 billion in her last budget. The institute also expects a downgrade of up to £30 billion in Britain’s fiscal outlook, bringing the total required fiscal adjustment to around £50 billion.
Because Reeves already outlined long-term spending plans in June, most of the adjustment would need to come through tax hikes. “A large adjustment on the fiscal side is essential,” said NIESR Director David Aikman. He warned that without credible measures, markets could react negatively, causing a repeat of the “Liz Truss moment,” when borrowing costs spiked sharply.
Truss’s unfunded tax cuts in 2022 caused financial chaos and forced Bank of England intervention. While long-term borrowing costs have eased recently, economists remain concerned that Reeves’ plans might leave little room for error if new shocks hit the economy.
Reeves, who became finance minister after Labour’s 2024 election win, recently said that “everyone will have to contribute” to restore economic stability. Media speculation suggests she may raise income taxes, breaking a pre-election promise. NIESR’s estimate of Britain’s fiscal gap remains among the highest of any forecast.