Millions of taxpayers will be dreading the upcoming Budget as Rachel Reeves struggles to fill a gaping black hole in the UK’s public finances. The Chancellor, reeling from a series of dire economic figures over the summer, is facing a fresh headache about the looming Budget which comes amid concerns that the shortfall in the government finances could be up to £40bn.
What we do know is that the chancellor has set a late budget for November 26 – a month later than last year, which took place on October 30. The later-than-normal date is likely to lead to weeks of uncertainty for Brits and businesses as speculation continues to mount. The make-up of what will be included in the Budget is surrounded in uncertainty, with Reeves rubbishing much of the speculation.
Currently, economists believe she will need to find £20bn or more to restore the public finances to health with the chancellor reportedly weighing up imposing capital gains tax on main residences worth more than £1.5million, a levy currently reserved for second homes and assets such as shares.
Economists are also warning that “things look more likely to get worse than better,” and the Chancellor should be particularly concerned about three things.
Five things Reeves should be wary of:
1. Bond yields are unlikely to improve
The last time interest rates on 30-year UK bonds were this high, Rachel Reeves was a first-year student at Oxford in 1998.
The 10-year yields that the Office for Budget Responsibility (OBR) uses to forecast future borrowing costs were also on the rise, hitting the highest level since January, at 4.82%.
Alex Kerr at Capital Economics estimates that the rise in the yield since the Spring Statement will cost the public purse an extra £5.8bn per year, according to The Telegraph.
Mortgage experts warn this could translate into higher borrowing expenses for households already under strain.
2. Inflation is increasing
Reeves has so far been unable to curb inflation with the Office for National Statistics confirming inflation accelerated more than expected to 3.8% in July on the back of higher food prices and airfares.
In a major blow to Labour, inflation is predicted to continue soaring with the Bank of England forecasting it will hit 4% – double the target of 2% – over the next couple of months.
3. Interest rates higher for longer
The Bank of England’s Monetary Policy Committee (MPC) cut the UK’s base interest rate from 4.25% to 4% on August 7, 2025, to stimulate a struggling economy.
The cut was only narrowly backed by the Bank’s policymakers who took two votes to reach a decision.
Lower rates will reduce monthly mortgage costs for some homeowners but it could also mean smaller returns for savers.
4. GDP plunges as economy slows
Growth in the UK economy slowed in the second quarter of this year amid pressure from tariff uncertainty and tax increases, new official figures show. The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.3% for the quarter after 0.7% growth in the first three months of the year.
Harry Mills, director at London-based Oku Markets, said the figures are “evidence of a flat-lining economy”.
Tory Shadow Chancellor Sir Mel Stride accused Reeves of “economic vandalism” with business indicators “flashing red.”
5. The rest of the world is in tatters
Currently the biggest threat appears to be coming from France as the French Prime Minister François Bayrou risks losing a crucial confidence vote in parliament next Monday. ·
The three-time presidential candidate looks set to be booted out as France’s prime minister.
As the scale of borrowing in both the UK and France is similar, there are concerns that chaos in France could prompt investors to flee Britain too.