The Task at Hand
On the 26th of November, Rachel Reeves is scheduled to present this year’s budget to parliament. Like every year, the challenge for the chancellor involves balancing several critical aspects:
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Generating sufficient revenue to support public services that the electorate expects.
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Maintaining tax rates at levels that taxpayers find acceptable.
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Ensuring the government’s lenders in the bond markets remain confident in its ability to service its debts.
The Strategy
In this interactive exercise, you have the opportunity to craft a successful budget yourself. Can you satisfy the demands of backbenchers without alienating the bond markets? And can you manage to balance the budget while doing so?
Like the actual chancellor, you start with a deficit.
During the spring statement, Reeves had a financial leeway of £9.9bn, based on her fiscal rules which state that day-to-day expenditures must be covered by receipts by the end of this parliament.
However, this cushion is expected to have been depleted by a combination of higher borrowing costs, welfare policy reversals, and a likely downgrade in productivity forecasts by the Office for Budget Responsibility.
The Institute for Fiscal Studies anticipates that by 2029-30, government borrowing could exceed earlier predictions by £22bn. To adhere to her fiscal rules, Reeves would need to implement £12bn worth of tax increases and spending cuts. To restore her initial £9.9bn buffer, a total adjustment of £22bn would be necessary.
Despite the daunting numbers, it is anticipated that Reeves will aim to create a new financial buffer, possibly around £20bn, to alleviate concerns in the bond markets.
Your role in this simulation is to address the £12bn shortfall. You’ll observe the corresponding changes in the yellow bar as you make different policy decisions. Pay attention to market alerts and opinion polls to gauge their reactions to your strategies. Best of luck!
(If you find yourself in a tough spot, look out for treasury briefings – chart icon – and political updates – note icon – for additional insights.)
Sources and notes: The estimates for each fiscal measure and the current government balance come from a mix of economists, think tanks, and the government’s own projections, including Capital Economics, Resolution Foundation, Institute for Fiscal Studies, National Institute of Economic and Social Research, IPPR, and HM Revenue and Customs. These figures often rely on assumptions about future economic growth, inflation, collection rates, and other factors, and should be viewed as illustrative of the potential impacts of different fiscal measures. This simulation is not intended for the actual management of a major economy.
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