Reeves is panicking – delaying the Budget is a big gamble with the economy

The budget will not be held until 26 November – the latest date in 10 years. The chancellor is rolling the dice again in the hope of better news for the country’s shaky economy, writes James Moore

With the bond markets in ferment, it is surely no coincidence that the chancellor has announced the latest date for the autumn budget in more than 10 years, announcing the big day will take place on 26 November. Last year it was held on 30 October.

The recent back-and-forth between an autumn and a spring Budget makes comparisons with previous years a little complex. But if we consider Britain’s annual autumn fiscal event, whatever its title, we have to go back to 2014 and George Osborne to find it occurring later (3 December) than this year.

It is hard not to conclude that Reeves’s motivation for delay is the hope that the bond markets calm down in the interim. Borrowing costs hit a 27-year high this week, and any fall would be hugely beneficial to the chancellor given the profound fiscal challenges she faces, with estimates of the “black hole” in the public finances ranging from £20bn to £40bn.

What is behind the bond markets’ distemper? Is the chancellor’s shaky credibility finally on the rocks? Or is something else at work?

The truth is a bit of both. The UK is far from alone in suffering from a surge in borrowing costs. There has been a global market-wide tremor. Part of the problem is down to a lack of demand for long-dated debt from maturing pension funds, previously some of the biggest customers. This creates trouble for the UK because 30-year bonds make up a disproportionate proportion of this country’s IOUs.

Figures from the Bank of International Settlements put the average maturity of UK debt at 14.7 years. Compare that to the US (6.2 years), Canada (6.7), Australia (7) and Germany (7.1). These figures are from 2022, but they serve to illustrate just how much of an outlier the UK is.

The country could, of course, switch to issuing more shorter-term debt. But this is not a quick fix for Reeves, with the Office for Budget Responsibility breathing down her neck and preparing to mark her homework. A sudden sharp rise in shorter-dated UK gilts could also create problems. A sudden increase in supply will cut demand, forcing the issuer to pay higher interest rates to get its bonds sold.

However, some of the chancellor’s problems are also local, and in part due to her decisions. By that, I mean her bad decisions. The raft of inflationary tax rises and bill increases that hit in April pushed up inflation. The consumer prices index has remained uncomfortably high, jumping to an unexpectedly nasty 3.8 per cent in July. For comparison, the latest figures show the eurozone at just 2.1 per cent and even the US, with all those tariffs (in theory) pushing up the price of consumer goods, at 2.7 per cent.

While the Bank of England cut base rates to 4 per cent last time, I wouldn’t expect to see further movement this year unless the expected decline in inflation is realised. It looks likely that rates will now fall more slowly than had been hoped.

On the flip side, there have been signs of the economy picking up a little steam. UK plc isn’t exactly in the fast lane, but it set the pace in the G7 in the first half of the year, and while it slowed in the second (spring) quarter, it nonetheless outperformed expectations.

It’s worth pointing out that compared to the rest of the world, the UK is far from the worst fiscal offender. The US continues to run a deficit of more than 6 per cent. Donald Trump doesn’t appear to have any plan to address it, beyond magical thinking (tariffs, and the US economy enjoying a big beautiful boom as a result of them). The French government is on a cliff edge as it struggles to set a budget. The US, France, Spain, Italy and Japan all have a higher debt-to-GDP ratio than Britain.

Reeves, with her “non-negotiable” fiscal rules, arguably has more of a plan to control debt than all of the above. But the government still has a credibility and competence problem.

We should also remember that while delaying the big day could leave the chancellor in a better position if the markets do move in her favour, it is far from risk-free. They could equally stay bad or even move further against her.

Confidence remains thin, the housing market is riven with uncertainty over what the chancellor might do with property taxes, and there is a persistent feeling of autumnal gloom that goes beyond the ever-fickle British weather.

Poor political judgement and a flat-footed response to economic circumstances have compounded the problems the nation faces.

This is fixable. But the chancellor and the prime minister need to do better. They have much to prove, and the markets are watching. They’ve brought down chancellors and, yes, even prime ministers before. They could do so again if the incumbents don’t shape up.