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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is a senior fellow at the Institute for Government and a former civil servant, including at the Treasury
Despite her avowed intention of bringing the UK into line with international norms by holding only one major fiscal event per year, Rachel Reeves managed to subject the country’s economy to a rolling fiscal drama in 2025. Through a combination of “iron clad” fiscal rules, minuscule headroom for turbulent times and the inability of the government to control its backbenches, the chancellor caused an unsettled mood across the UK.
Now we need the fiscal equivalent of dry January. After a year of policy speculation and damaging uncertainty, let us make this the year of fiscal non-events — at least until the autumn Budget.
So, what should the chancellor avoid repeating? Although the multiyear spending review was held without significant backlash, the Labour leadership suffered two big reversals in its attempts to restrain welfare spending, backing down on ending the winter fuel allowance for all but the poorest pensioners and abandoning cuts to disability benefits.
Both were ill-planned reactions to fiscal bad news. Reeves surprised everyone by singling out the handout to pensioners for abolition, while cuts to disability benefits were pasted on at the last minute to more carefully planned reforms, and were supposed to cover the Office for Budget Responsibility’s downgrade of the fiscal forecasts in the spring.
These two reversals — combined with deciding to bolster headroom — were the reason Reeves had to renege on her “one and done” commitment and raise taxes again in November. But the months of speculation and increasingly public friction between the Treasury and the OBR sapped confidence. This ran counter to the government’s commitment to improve UK growth performance through stable, responsible governance.
Reeves has now decreed that the OBR will update its forecast in the spring but there will be no assessment of the fiscal rules. She hopes this will avoid her being panicked into rushed measures to restore the UK’s credibility with the markets — although it will be easy for commentators and market players to make their own assessment based on the OBR’s forecasts.
This year is an important test of whether the chancellor can deliver the prize of a single, more considered Budget once per year. More headroom will give her a better chance that the forecast will not put her in breach of her rules. But she would be helped even more if external commentators treated the next OBR update as just that — a six-monthly check-in that gives the Treasury early indications of the decisions it will need to make in the autumn. A low-key publication from the OBR, muted response combined with a clear commitment from Reeves to make good any gaps if they persist should turn the Spring Statement into something that barely troubles the political calendar.
The UK has derived no benefit from giving chancellors two opportunities a year to meddle in the tax system. It makes planning hard for those outside government. And it puts officials and ministers in the Treasury and their HM Revenue & Customs colleagues on a treadmill, constantly preparing for the next fiscal event.
Reeves’ two reversals on welfare cuts showed the problems of acting in haste without either the necessary policy or political groundwork to make changes stick. We have yet to see a compelling tax reform programme, one to make sure that the system acts as a promoter not inhibitor of growth — while meeting the government’s objectives for redistribution. Combining that with a well-designed programme of genuine, sustainable welfare reform to get spending under control will take time. Which the chancellor now has — and must make the most of.