Market Turmoil and Cabinet Shifts Set to Shape Reeves' Budget
As bond markets waver and backbench scepticism grows over spending cuts, Chancellor Rachel Reeves faces critical decisions ahead of the November Budget.
The government’s first week back has been marked by resignations, a cabinet reshuffle and volatility in bond markets, all of which will influence Chancellor Rachel Reeves’ red Budget box on 26 November.
Reeves’ Position Solidified
Despite speculation over her future, Reeves’ role remained secure as she toured a housing site in Birmingham this summer, emphasising the need for new qualifications and more flats and houses.
She dismissed rumours about a "black hole" in forecasts and resisted pressure on potential Budget measures, urging forecasters at the Office for Budget Responsibility (OBR) to focus on their core remit rather than policy commentary.
Bond Markets in Focus
Global bond yields have risen, pushing the UK’s 30-year gilt rate to levels unseen since the early Blair-Brown era. Reeves and her team argue that this shift mirrors international trends rather than UK-specific concerns, a view supported later in the week by weaker US jobs data and comments from Bank of England Governor Andrew Bailey.
Implications for the Autumn Budget
Fragile markets serve as a warning: any loss of credibility could spike borrowing costs. Reeves’ advisers plan to use these market movements to justify filling any fiscal gap through higher taxes or lower spending rather than loosening borrowing limits.
The OBR’s productivity forecast will be crucial, with its judgement due just before Reeves’ speech at the party conference in Liverpool. At that point, potential revenue measures will populate the Treasury’s "scorecard", and speculation over windfall taxes or welfare reforms will intensify.
With departmental spending set by the recent Spending Review, any additional cuts are likely to come from welfare. Reeves has signalled further work incentives but must balance growth reforms against backbench pressure.
The upcoming Budget will require Reeves to balance market stability, independent forecasts and internal party pressure, forcing tough choices between tax rises and spending cuts.
This topic was reported by BBC News
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