PwC Chief Economist previews the upcoming UK Budget 2025

Barret Kupelian, Chief Economist, PwC UK said: 

“The upcoming Budget is set to break convention and could well be the most dramatic one for this government.

“This will be the second fiscal event the Chancellor is expected to stand at the Dispatch Box and announce that the buffer against her own fiscal rules has vanished, a casualty of downgraded productivity, undelivered spending cuts and higher funding costs than first envisaged.

“The Chancellor now faces three vital choices. 

“First, how much fiscal headroom should she build for the future? This is the trade-off between a ‘thick’ buffer, which implies more economic pain now but greater certainty later, and a ‘thin’ buffer, which offers short-term relief but carries the risk of sharper tightening six to twelve months down the line.

“The former is a bet on patience, the latter, a gamble on luck. Recent experience suggests both are in short supply.

“Second, what breadth of policy tools should she use? Some of the least distortive tax options could raise significant sums, but they come with political constraints. Conversely, the taxes that raise less revenue often cause more disruption.

“Finally, how should she balance tax rises against spending cuts? So far, the Chancellor’s fiscal tightening emphasised tax increases. But after the bruising experience of higher employer National Insurance contributions, both businesses and households remain wary. 

“In short, this will not be a Budget of numbers, but a Budget of choices: how thin a cushion, how bold a move, and how balanced a mix.

“The Chancellor will also want to weave in an aspirational message, not an easy task given the current public mood.

“For the public, she could frame the Budget more positively by offering targeted support, or at least a future promise, towards the main life goals: building a career, buying a home, starting a family, launching a business and saving for retirement. Households remain the largest spenders in the economy, so any move to energise them would be welcome.

“This will no doubt be an exciting Budget. Success will be if the Chancellor can make them boring again.”