Economist warns Autumn Budget may not fill fiscal hole as Labour pledges constrain Reeves

Measures announced in Chancellor Rachel Reeves's forthcoming Autumn Budget are unlikely to be enough to fill Britain's fiscal hole, according to Hetal Mehta, chief economist at St James's Place. Speaking to This is Money on Thursday, Mehta said that "whatever fiscal package the Chancellor comes up with is likely to be insufficient" to balance the books. Reeves faces a difficult choice on 24 November as she weighs Labour's manifesto pledges against the urgent need to restore fiscal credibility. Mehta said the commitments will "severely restrict" the Chancellor's ability to get ahead of any kind of economic deterioration or fiscal holes opening up again.

Mehta cautioned that Labour's 2024 manifesto promises to prioritise wealth creation and economic growth, including no increases to income tax, employee National Insurance or VAT, will constrain what the government can do. The government says its election manifesto is non-negotiable and will apply to every decision taken by a Labour government. In last year's Autumn Budget, Labour raised capital gains tax and announced pensions would be pulled into the inheritance tax net from 2027. The same budget also increased National Insurance contributions for employers to 15%.

With a £20 billion hole in the public finances and hopes of adding £10 billion of fiscal headroom, Reeves needs to find about £30 billion from the autumn measures. Mehta said: "Some of the measures being talked about... none of them on their own fill the fiscal hole. 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 said the Chancellor's likely path will be to boost the Treasury's tax take, but warned against overly complicated changes that risk failing to raise the money needed. "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." The mood around the Autumn Budget is already tense, she added, with budget speculation at fever pitch.

Budget speculation is at fever pitch already. Mehta said the focus may be on simplifying rules or broadening the tax base, but warned against creating a maze of exemptions that erode long‑term credibility. As Reeves weighs a plan that can deliver both growth and stability, the balance between manifesto promises and fiscal reality will shape how the autumn measures are framed and communicated. With the November budget date drawing closer, markets, politicians and the public are watching how the chancellor will reconcile the pledge to support growth with the imperative to repair the public finances.