By Innovation Times Economic Desk
October 15, 2025 | London
UK Chancellor Rachel Reeves has confirmed that the government is weighing both tax increases and spending cuts as part of its strategy to stabilize public finances ahead of the upcoming national budget.
Speaking during a briefing at the Treasury on Monday, Reeves said the measures are being discussed amid slower-than-expected economic growth and persistent inflationary pressures, which have strained the government’s fiscal outlook.
“We are reviewing every option available to ensure fiscal responsibility,” Reeves said. “This includes reassessing spending priorities and potential tax adjustments that safeguard economic stability while protecting working families.”
The Chancellor emphasized that no final decisions have been made, but she acknowledged the difficult trade-offs required to reduce borrowing and restore investor confidence. Economic analysts believe the government faces a budget deficit exceeding £80 billion, driven largely by higher welfare spending and sluggish productivity across key industries.
Insiders say the Treasury is considering targeted cuts to departmental budgets and temporary tax adjustments, including possible reforms to capital gains and inheritance tax. However, Reeves reaffirmed her commitment to avoiding broad-based income tax increases that could further burden middle-income households.
Business groups have urged the government to balance fiscal tightening with pro-growth policies, warning that steep cuts or higher taxes could undermine investment and consumer confidence. The Confederation of British Industry (CBI) has called for incentives that stimulate innovation, infrastructure development, and green technology investments.
Financial markets reacted cautiously to Reeves’ remarks, with the pound dipping slightly against the dollar, reflecting investor uncertainty over the scope of potential fiscal tightening.
Political observers note that Reeves’ comments mark a shift toward more pragmatic economic messaging, as the government seeks to project competence in handling the cost-of-living crisis and mounting public debt.
The Chancellor is expected to unveil the full autumn budget later this month, outlining how the government plans to balance fiscal discipline with social and economic priorities
