Chancellor Rachel Reeves confronts a £41 billion black hole created by Labour's U-turns and sluggish economic growth. The National Institute of Economic and Social Research has indicated that she could either raise taxes or amend her borrowing rules to resolve the shortfall by 2029-30. With increasing pressure to raise income tax or implement a wealth tax, tax increases seem more likely after prior spending cuts limited departmental budgets. This has created an 'impossible trilemma' for Reeves in fulfilling fiscal rules while ensuring budget commitments are met.
Rachel Reeves faces significant pressure to either raise taxes or amend borrowing rules to address a £41 billion budget shortfall resulting from economic challenges.
Top economists warn that Reeves must navigate an 'impossible trilemma' of maintaining fiscal rules while fulfilling spending commitments and avoiding tax increases on working individuals.
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