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There is growing criticism of Rachel Reeves for her orthodox approach to managing public finances. Although modest reductions in spending proposed in the spring statement cannot be termed a return to austerity, they are expected to cause substantial harm to vulnerable populations at a time of rising wealth inequality.
<p class="dcr-s3ycb2">Critics believe the Chancellor's policies for improving living standards are flawed, arguing that more radical reforms of Britain's economy need government support. This article explores various options open to the Chancellor.</p>
<h2 id="borrow-more" class="dcr-12ibh7f">Borrow More</h2>
<p class="dcr-s3ycb2">Borrowing from international money markets, which was like a free lunch post-2008 financial crash, is no longer viable. The chancellor, <a href="https://www.theguardian.com/politics/georgeosborne" data-link-name="in body link" data-component="auto-linked-tag">George Osborne</a>, missed this opportunity. Today, global lenders demand higher prices, especially for heavily indebted nations like the UK. Reeves is projected to spend over £100 billion on debt financing next year, exceeding allocations for defense, home office, and justice combined.</p>
<p class="dcr-s3ycb2">Economists struggle to define the limit of feasible borrowing, leaving financial markets to decide. France, with a credit downgrade threat after surpassing 110% of GDP in debt, is saving €50 billion from its 2025 budget. The UK, with lower productivity and an economy more susceptible to trade disruptions, appears to be hitting its limits near the 100% debt to GDP ratio.</p>
<figure id="7b662354-8c33-44f4-b5bb-ac643ed3d1a0" data-spacefinder-role="inline" data-spacefinder-type="model.dotcomrendering.pageElements.ImageBlockElement" class="dcr-173mewl"><figcaption data-spacefinder-role="inline" class="dcr-1tx6u99"><span class="dcr-1inf02i"><svg width="18" height="13" viewbox="0 0 18 13"><path d="M18 3.5v8l-1.5 1.5h-15l-1.5-1.5v-8l1.5-1.5h3.5l2-2h4l2 2h3.5l1.5 1.5zm-9 7.5c1.9 0 3.5-1.6 3.5-3.5s-1.6-3.5-3.5-3.5-3.5 1.6-3.5 3.5 1.6 3.5 3.5 3.5z"/></svg></span><span class="dcr-1qvd3m6">Rachel Reeves prepares to deliver her spring statement on March 26.</span> Photograph: Carl Court/Getty Images</figcaption></figure>
<h2 id="cut-spending-in-other-ways" class="dcr-12ibh7f">Explore Alternative Spending Cuts</h2>
<p class="dcr-s3ycb2">Whitehall departments are lean, with potential savings from quangos being minimal. Another approach is to scrutinize the £200 billion in tax breaks identified by the National Audit Office that have not been effectively monitored or proven by successive governments. A significant tax break is the tax-free allowance for pension saving, costing the government approximately £40 billion annually. It is unclear whether savers would stop contributing to pensions if government subsidies were reduced.</p>
<p class="dcr-s3ycb2">Is it fair for pension savers to withdraw a quarter of their pot as a tax-free lump sum? This subsidy is likely to be reviewed in the autumn budget, according to the Institute for Fiscal Studies.</p>
<h2 id="redefine-investment" class="dcr-12ibh7f">Redefine Investment</h2>
<p class="dcr-s3ycb2">Many aspects of daily spending can be viewed as investment. For instance, collaborations between local governments and health services to address the mental health crisis could result in significant savings. With over 1 million people on the waiting list for NHS talking therapies, increased spending could yield millions in savings. Academic studies demonstrate substantial reductions in support needs following participation in the latest programs.</p>
<p class="dcr-s3ycb2">The budget rules for investment are more flexible than those for day-to-day spending. Relocating some costs to the investment category could help Reeves meet both targets.</p>
<h2 id="abolish-or-reform-the-office-for-budget-responsibility" class="dcr-12ibh7f">Abolish or Reform the Office for Budget Responsibility</h2>
<p class="dcr-s3ycb2">After 15 years, concerns are growing about the OBR's excessive influence over government planning. Its twice-yearly reports may force the Treasury into tactical adjustments rather than strategic planning. The OBR is also seen as conservative in its assessments of government initiatives.</p>
<p class="dcr-s3ycb2">While this approach was sensible when Liz Truss proposed £40 billion in unfunded tax cuts to boost growth and eventually increase tax revenue from higher incomes, it may not be the best for assessing the long-term benefits of state-funded mental health therapies. Strengthening rather than abolishing the OBR could be beneficial. It should have its own resources and staff, increasing its independence from the Treasury. While its reports would continue to assess departments against budget projections and provide an economic outlook, the chancellor would be less burdened by the need for frequent plan adjustments to meet short-term targets.</p>
<h2 id="rewrite-the-budget-rules" class="dcr-12ibh7f">Revise the Budget Rules</h2>
<p class="dcr-s3ycb2">Reeves adopted looser fiscal rules than her predecessor but still finds them restrictive. The National Institute of Economic and Social Research is a significant critic, arguing these rules create unnecessary stress. It suggests the OBR could provide a "state of the economy" overview, assessing the government only against controllable targets like welfare and public service spending.</p>
<p class="dcr-s3ycb2">This change would mean the recent interest rate hikes, which increased debt financing by about £10 billion, would be noted but action could be delayed until the issue proves persistent.</p>
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<h2 id="tax-more" class="dcr-12ibh7f">Increase Taxation</h2>
<p class="dcr-s3ycb2">Starmer has pledged to maintain income tax, employee national insurance, and VAT at their current levels, which most economists agree would stifle growth in a period of stagnation. However, there was a missed opportunity to raise fuel duty as an environmental measure when oil prices were low, which could have raised nearly £5 billion. The significant fiscal deficit left by the Conservatives also justifies breaking the income tax pledge and implementing a surcharge on millionaires. Although tax experts argue
