In a recent report, the Resolution Foundation has urged Chancellor Rachel Reeves to adopt stricter fiscal measures and demonstrate decisive action in preparation for the upcoming spring statement. The organization highlights that current economic conditions, characterized by elevated interest rates, sluggish growth, and reduced tax revenues, necessitate fresh financial tightening. Reeves is scheduled to address the House of Commons on March 26th. However, the group cautions against adversely impacting the living standards of lower-income households amid an already struggling jobs market.

The foundation suggests extending the freeze on personal tax thresholds until 2029-30, which could generate approximately £8 billion. This measure would primarily affect wealthier families without immediately affecting living standards since it would only come into effect in April 2028. Additionally, the UK's economic outlook has significantly worsened since the autumn budget, with GDP projections dropping by around 1.2%, inflation rising by 0.4 percentage points, and interest rate expectations also climbing.

Employment figures from the Office for National Statistics and HMRC payroll data indicate a decline consistent with recessionary trends. Consequently, the Office for Budget Responsibility (OBR) might revise its projection for the current account balance, shifting from a surplus of £9.9 billion in 2029-30 to a deficit of about £4.4 billion. Without new policy interventions, Reeves risks violating her recently established fiscal regulations.

One potential solution involves reducing planned spending ahead of the spending review. Cutting the annual real increase from 1.3% to 1.2% between 2026-27 and 2029-30 could save £3 billion by 2029-30. Nevertheless, further cuts to 'unprotected' departments, which are already facing reductions of nearly £10 billion post-next year, could jeopardize essential services such as social care, justice systems, and policing.

James Smith, research director at the Resolution Foundation, emphasized the necessity for prompt and thoughtful fiscal actions. He stressed that consolidating finances should not disproportionately burden low-income households, especially given the current state of the job market. Furthermore, he advised against short-term fixes that could undermine long-term welfare reforms. Given the likelihood of increased fiscal pressures in Britain, ruling out tax increases may complicate future budgetary decisions.