Bean flags danger in Reeves’s tight fiscal buffer

Mace | 4th July 2025 | Politics
Bank-of-England

Charlie Bean warns that Rachel Reeves’s sub‑£10 billion fiscal buffer is dangerously lean compared with the £30 billion norm. He argues that such tightness forces constant adjustments and leaves no room for error. Bean urges tax rises or threshold freezes to build back buffer and avoid knee‑jerk spending cuts.

Charlie Bean, a former deputy governor of the Bank of England and member of the Office for Budget Responsibility’s budget responsibility committee, has warned Chancellor Rachel Reeves that her current fiscal planning leaves insufficient buffer to manage public finances. The headroom she has allocated—just under £10 billion—is far tighter than the roughly £30 billion buffer previous chancellors have typically maintained. Bean argues that such a narrow margin leaves the government vulnerable to minor forecast variations and forces frequent micro‑adjustments to tax and spending plans just to align with the OBR’s five‑year projections.

In October 2024 Reeves raised taxes by around £40 billion, chiefly to fund public services, but the decision failed to yield meaningful fiscal slack. By March of this year the headroom she had secured was evaporating, triggering the government’s hurried efforts to find £5 billion in welfare savings—a move ultimately blocked by backbench opposition. Reeves’s twisted fiscal tightrope stems from the limited buffer she deliberately built into her autumn budget, a choice Bean says was the “original sin”.

Bean stresses that with total public spending in the region of £1.25 trillion, a headroom of less than £10 billion is negligible within the margin of typical forecasting errors. He points out that the OBR’s projections, extending over five years, are …

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