Economist: Autumn Budget unlikely to plug £30 billion fiscal hole

Measures likely to be unveiled in Chancellor Rachel Reeves’ Autumn Budget are unlikely to close Britain's mounting fiscal gap, according to Hetal Mehta, chief economist at St James's Place. Mehta told This is Money that whatever package Reeves delivers on 24 November, 'whatever fiscal package the Chancellor comes up with is likely to be insufficient' to balance the books. Reeves faces a tough decision as she weighs Labour's manifesto pledges with the urgent need to shore up public finances. Labour's 2024 general election manifesto promised to prioritise wealth creation and economic growth, including no increases to income tax, employee National Insurance or VAT. The government has said its manifesto is non-negotiable for any decision taken by a Labour government.

With a roughly £20 billion hole in the public finances and hopes of around £10 billion of 'fiscal headroom,' Reeves must find about £30 billion from autumn-budget measures. Mehta said: 'Some of the measures being talked about, and things that could still be looked at - none of them on their own really quite fill the fiscal black hole.' She added that 'the sorts of numbers they are looking at are maybe £5 billion here, £5 billion there. But you're looking at a hole up to £30 billion. Something has to give, whether it is the fiscal rules or the manifesto pledges.' Mehta expects the Chancellor's focus to be on boosting the Treasury's tax take, but warns that pursuing multiple, small adjustments could lead to overly complex changes that fail to raise enough revenue. 'I've long been an advocate for simplifying tax changes,' she said. 'One to two pence on income tax would be easier to explain to the electorate, rather than all of these small measures.' 'So you have to yank all of those levers really hard to generate anywhere near the kind of tax revenue that would be needed.'

Reeves inherits a policy legacy from Labour's recent budgets. In 2024's Autumn Budget, Labour introduced a raft of tax changes, including higher capital gains tax and bringing pensions into the inheritance tax net from 2027. The party also raised National Insurance contributions for employers rather than employees, lifting the employer rate to 15 percent. With a projected £20 billion hole and only modest headroom, officials have signaled that this year's budget will need to lean more heavily on revenue-raising measures even as growth-friendly policies remain central to Labour's longer-term aims.

Analysts caution that no single policy will resolve the gap. Some observers say Reeves could adopt a simpler tax package rather than a sprawling set of targeted measures. Mehta's stance underscores the appeal of straightforward steps that maximize revenue without adding unwieldy administration. She argues that a clear, easy-to-explain move—such as a small, broad-based income-tax adjustment—could be more effective than a patchwork of niche reforms.

Budget speculation has reached fever pitch as investors and markets await Reeves's plan. Economists warn that a misstep could undermine confidence or widen deficits if growth slows or tax gaps widen. The atmosphere around the Autumn Budget has intensified as Labour's priorities intersect with tightening fiscal constraints.

With the deadline approaching, Reeves will need to balance growth, fairness, and fiscal prudence. While she has signalled a commitment to the manifesto, Mehta and other economists warn that the government cannot rely on a handful of small measures to close a potential £30 billion hole. The debate centers on whether to lean on revenue-raising policies or to pursue more sweeping consolidation, a choice that could shape the country’s fiscal framework for years to come.

As the budget date nears on 24 November, the country watches how Reeves will triangulate Labour's promises with the immediate need to shore up public finances. The outcome could influence investment decisions and the broader trajectory of the UK economy in the year ahead.