Reeves Urges Ministers to Rein In Spending and Back the Bank of England to Tame Inflation

9 September 2025

British Chancellor of the Exchequer Rachel Reeves leaves following a cabinet meeting at 10 Downing Street, in London, Britain, September 9, 2025. REUTERS

In a cabinet meeting in early September, Britain’s Chancellor of the Exchequer Rachel Reeves stood in front of her ministers and delivered a clear message: if inflation is to be brought under control, the entire government must pull in the same direction as the Bank of England. With the annual budget set for November 26 looming large, Reeves emphasized fiscal discipline, warning that high inflation and borrowing costs have placed the economy under strain. There was no talk of shortcuts. Instead, she pressed for focused spending restraint and policies that support sustainable growth.

Britain is currently wrestling with inflation that was at 3.8 percent in July, the highest among the G7 nations. Forecasts suggest that this rate will climb to about 4 percent later in the year before gradually declining toward the Bank’s 2 percent target, perhaps in mid-2027. Reeves made it clear that while the economy may not be “broken,” the risks are real rising costs, public disquiet, and market concern over the country’s fiscal outlook. She warned that borrowing costs have already been pushed up by investor unease. Stability, she said, depends in part on ministers staying within departmental budgets and resisting demands for large wage increases in public sector roles that might further stoke inflation.

Her approach walks a fine line. On one hand Reeves promised no escape from fiscal discipline no loose spending, no ignoring the damage inflation is doing, and no letting borrowing spiral out of control. On the other hand she reaffirmed the need for policies that drive growth. Reeves called on departments to think carefully about their contributions to the wider inflation challenge. She asked that spending be reviewed with inflation in mind, that cost pressures be managed across government, and that whatever revenue-raising measures emerge in the November budget be seen through the lens of whether they may themselves make inflation worse in the near term.

Prime Minister Keir Starmer has acknowledged that part of the challenge Reeves inherited stems from the previous Conservative administration. Reeves in her remarks referred to this context more than once weaker growth forecasts, higher energy costs, and a fiscal gap she said could be reduced with tough choices. However, her calls for tightening have not been universally popular. Tax increases for businesses, proposed cuts in welfare spending, and controversial increases in employers’ national insurance contributions and the minimum wage have already drawn criticism. Reeves’ insistence that inflation must come down has to be balanced against the economic and political risks of squeezing households and businesses.

Markets reacted sharply. The yield on UK gilt bonds with 20- and 30-year maturities rose to levels not seen since 1998 in response to signals that the government’s budget may include tax measures or levies that could stir inflation. Investors are nervous that without alignment between fiscal policy and monetary policy the cost of servicing government debt and long-term borrowing could grow even more burdensome. Reeves’ message was intended in part as reassurance: that her government understands the stakes and intends to act responsibly.

Reeves is due to present her budget in late November. It has now been shaped by her priorities: to help the Bank of England do its job of taming inflation, to foster growth where possible, and to avoid policies that could backfire by feeding into inflation rather than calming it. Her fiscal path includes tax rises, spending control, and possibly welfare reforms. Each will be scrutinized not just for their economic impact, but for how they interact with inflation expectations and public trust.

In short Reeves’ message to her party and to the public is that she sees fiscal orthodoxy as essential right now. Support the central bank, be cautious about spending, and avoid creating inflationary pressure through overly aggressive wage demands or sudden tax shocks. The government’s challenge will be to hold that line while maintaining enough momentum in growth so that voters do not feel only the burdens of inflation control. With inflation high, economy fragile, and the global outlook uncertain, Reeves is framing the coming months as a test of whether her government can deliver stability without sacrificing fairness.