According to a think tank, British Finance Minister Rachel Reeves is likely to miss her budget goals once more, partly because of the impact her tax increase on employers has had on economic growth. This could lead to additional tax increases later in 2025.
The National Institute of Economic and Social Research believed that if growth is weaker than anticipated for the rest of this decade, the government may spend 57 billion pounds (USD 76 billion) more than it takes in during the 2029–2030 tax year.
One of Rachel Reeves’ fiscal goals is to balance the current budget by the end of the decade, and she plans to do so by using taxes rather than borrowing to pay for all non-investment spending.
In November, the announced tax hike on businesses resulted in a financial allowance of only £10 billion to meet the fiscal objectives for the years 2029-2030. In a quarterly outlook report, the National Institute of Economic and Social Research (NIESR) amended its predictions for the British economy’s growth, reducing it from the original 1.5% in 2025 to a revised 1.2%. The forecasts for 2026 remained unchanged at 1.5%, while the projections for the ensuing years, until 2030, were modified.
According to Benjamin Caswell, a senior economist at NIESR, the downgrade was primarily due to domestic factors rather than the effects of higher trade tariffs imposed by United States President Donald Trump.
“Yes, tariffs have engendered a lot of uncertainty, but I don’t think that should be basically taking the government off the hook,” Caswell said.
Rachel Reeves discussed the outlook for Britain while mentioning the shifting global economic landscape.
Caswell claimed that businesses were hesitant to make investments and hire new employees because of Rachel Reeves’ November decision to restore only a small margin of error to meet her end-of-decade budget target.