Britain’s National Institute of Economic and Social Research said on Wednesday that Chancellor of the Exchequer Rachel Reeves is on course for a £41.2 billion shortfall against her self-imposed target of balancing day-to-day spending with tax revenue by the end of the decade. Restoring the £9.9 billion fiscal buffer she held in the spring would push the funding gap above £50 billion, the think tank warned, describing the situation as an “impossible trilemma” of choosing between tax increases, spending cuts or rewriting fiscal rules. Reeves, who already raised taxes by around £40 billion last year and imposed a £26 billion payroll levy on employers in April, has pledged not to lift income tax, VAT or employee national insurance for “working people.” NIESR said those promises now look untenable and suggested widening the scope of VAT, prolonging the freeze on income-tax thresholds or overhauling council-tax bands to raise revenue. Prime Minister Keir Starmer defended the government’s economic record but did not rule out further tax rises when the autumn budget is delivered, likely in October or November. Alongside its fiscal warning, NIESR nudged its 2025 growth forecast up to 1.3% but cut projections for subsequent years, citing weaker productivity, U.S. trade tensions and recent welfare U-turns. It expects inflation to average 3.3% next year before easing and projects two Bank of England rate cuts in 2025. UK bond futures slipped about a quarter point after publication of the report, underscoring investor concern about the widening hole in the public finances.