Great Britain: how will the government deal with the growing budget deficit

Almost a year ago, British Finance Minister Rachel Reeves described economic growth as a "national mission." However, twelve months later, financial markets are still skeptical about the implementation of this task. Economic growth is slowing, private investment remains sluggish, and public debt is close to 100 percent of gross domestic product. Under these circumstances, investors ' attention is focused on the next key speech of the minister at Mansion House, where specific decisions are expected from Reeves.

According to analysts, the autumn budget of 2026 will be a litmus test: it should answer the question of how the government intends to balance spending and revenue in the face of limited resources and political commitments. In particular, experts predict an increase in pressure on the financial sector. Potential measures include raising bank fees and discussing a possible tax on large fortunes. Despite the obvious revenue potential of such steps, they are associated with risks of capital and skilled personnel outflow.

Вопрос пенсионной реформы также стал предметом особого внимания. На фоне стареющего населения Великобритании расходы на государственную пенсию, по оценкам, могут достичь 7,7 процента от ВВП к 2070-м годам. При этом действующий принцип “тройной гарантии”, обязывающий индексировать пенсии по наибольшему из трёх показателей — инфляции, роста зарплат или фиксированных 2,5 процента, остаётся политически неприкосновенным. Это означает, что дефицит пенсионной системы придётся компенсировать за счёт других источников.

The difficulties are compounded by the Government's unwillingness to raise taxes for the working population. According to expert estimates, about 75 percent of the tax base under the current political obligations is outside the regulatory zone, which significantly limits the flexibility of the Treasury in finding new sources of income.

Against the background of these restrictions, the Ministry of Finance plans to ease the administrative burden on businesses. In particular, the review of the current regime of certification and control of top managers, which affects about 140 thousand specialists in the financial sector, is being discussed. These steps are seen as part of an overall strategy to boost growth through deregulation and increase investment attractiveness.

At the same time, Reeves is facing mounting public pressure. The rejection of previous decisions, such as cuts in benefits or heating subsidies, has undermined confidence in the Treasury's exchange rate. The situation is further aggravated by the refusal to change the regime of ISA savings accounts — a decision taken under pressure from public and professional associations.

The current phase of British fiscal policy requires maximum accuracy from the Ministry of Finance. What is at stake is not only the restoration of macroeconomic equilibrium, but also the political stability of the ruling team against the background of continuing public distrust and unstable economic prospects.