Is Rachel Reeves Making Decisions That Could Tank the Economy?

CREATED BY ROGER EDDOWES Published: 11/08/2025 @ 09:00AM #BritainFinance #RachelReeves #TurbulentWaters #HardTruths #EconomicStability

Navigating the turbulent waters of Britain's financial landscape, Rachel Reeves must confront some hard truths. Failure to make informed decisions could tank the economy and sacrifice the very economic stability and growth we aim for ...

Tank the economy, or fuel stability and growth? A Chancellor's conundrum

Right now, it feels as though we are staring down the barrel of a financial conundrum that could potentially cause great harm to our economy if not handled adeptly. As the Tories' supposed £22m black hole has spiralled to £50bn in less than a year of this Labour government, we now find ourselves at a crossroads.

The Chancellor has the formidable responsibility of
getting the nation's finances under control!

Yet her struggle to communicate the need for spending cuts to both the public and her colleagues is palpable. Two U-turns on proposed cuts have left many querying the government's strategy moving forward.

Without robust growth - predicted by the IMF to hover around 1.2 per cent this year and 1.4 per cent in 2026 - the pressure mounts. Relying solely on tax hikes reminiscent of draconian measures from last autumn's budget could, effectively, tank the economy. The indiscriminate rise in National Insurance not only hit businesses hard last year, but has increasingly provoked job losses, as firms grapple with escalating costs.

In addition, attempts to align Capital Gains Tax policies with income levels aimed at boosting funds have actually had an adverse effect - earning nearly £17bn less than anticipated. When non-dom rules shifted, they unintentionally encouraged asset relocations, frustrating efforts to capture wealth that should contribute to public services.

If Reeves opts for high-risk tax strategies while ignoring sensible alternatives, we could see repercussions far beyond mere budget shortfalls.

The idea of removing tax relief on pensions or altering taxable income categories - like rental income - might yield minor returns, but could inadvertently cause further damage to the economy. The Institute for Fiscal Studies suggests applying NI to pension contributions might raise significant funds, but the ultimate consequence will be borne by the workers, undermining their financial security further. This is not what Labour promised in its election manifesto.

Yes, if we face facts, significant revisions to our
taxation strategy must occur!

Dropping the triple lock on state pensions could free up considerable resources, alleviating future burdens projected by the OBR. There's also merit in broadening the scope of VAT application - strategies that could replenish public coffers without crippling citizens' financial future. These alternatives provide much-needed revenues while remaining reversible if economic conditions shift or if public sentiment demands it.

Denmark's recent, straightforward decision to raise the pension age to 70 serves as a stark reminder of the hard decisions necessary for fiscal health. Similarly, Reeves must lead in a manner that balances necessary revenue generation with the realities of public need.

Ultimately, this responsibility cannot be deferred!

The choices made today will either secure our financial footing in the long term or hasten an unwelcome descent that will surely tank the economy. Embracing tough decisions might not be politically expedient, but it is, without a doubt, a necessity for the future of our nation's finances.

I await the Autumn Budget with trepidation.

Until next time ...

ROGER EDDOWES
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About Roger Eddowes ...
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach. Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

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