Hitting the buffers – Resolution foundation
My Name is James Norris; I am 18 years old and currently doing 2 weeks of work experience with Cratus. This has been a great learning experience for me, and I’ve had the opportunity to attend events such as the Hitting the Buffers event, hosted by Resolution Foundation, which I attended last week.
The conversation revolved around the upcoming Autumn budget, and how a weaker economic outlook could affect it, with speakers, James Smith, Jennifer McKeown, Dharshini David, and Ruth Curtice.
Despite a generally positive speech about growth, the speakers edged on the side of caution and seemed to lack optimism.
One surprising fact I learned from the event is that growth does seem to be doing better than expected. Compared to other G7 economies, the UK’s GDP is performing relatively well, growing 1.1 percent in the first half of 2026, the highest rate in the G7. Proving that the narrative of consistent underperformance is not as straightforward as many might assume. It was however recognised that growth alone will not be enough to solve the fiscal challenges.
Since the spring forecast, inflation has become a major issue, with energy prices rising and geopolitical tensions, expectations have worsened. Although it won’t get anywhere near the peak of the cost-of-living crisis, prices will continue going up and may cause problems for households. Inflation raises both living costs and borrowing costs, which is a difficult situation for policy makers to navigate.
It was also mentioned that the fiscal buffer is disappearing. The estimate we were given suggested that the fiscal headroom may have halved with the current financial and spending projections. At the time of the last budget, the buffer was at £23.6 billion, and now the projection is around £12 billion. Borrowing costs seem to be doing most of the damage to the buffer as they have reached their highest level since 2007!
The recommendation given to fix this was to rebuild headroom to at least £20 billion by sticking to existing cash spending plans and raising around £8 billion in tax. Their suggestion on how to do this is to end Capital Gains Tax exemptions on death and leaving the UK, lowering VAT registration threshold, and charging National Insurance of partnership income.
Resolution Foundation warned of the possibility of energy bills returning to levels seen during Liz Truss’ term, but they specifically mentioned that support must be targeted at lower-income households rather than repeating the type of intervention that Liz Truss put in place.
On the topic of targeted support, ideas were proposed to support lower-income households by giving energy support to families where nobody earns above £24,000, giving help to renters by reforming the local housing allowance, and focusing on these specific households rather than universal support. The key idea was focusing support on those who need it most. Families will need this support, as the typical family is £2,900 worse off than if the economy had acted as expected pre-pandemic.
Spending cuts were also spoken about, and one of the most intriguing parts of the whole presentation was the topic of departmental spending.
Higher inflation rates have eaten away at departmental budgets, and maintaining spending plans has proven to be a very difficult task.
The government must also commit to defence spending, likely due to NATO requirements, putting additional pressure on the budget.
When you look at the budget from an outsider’s perspective, it is blatantly obvious that current projections will create difficult spending choices.
A question was then posed, asking opinions on the energy market assumptions.
The answer given by Capital Economics was optimistic, assuming geopolitical tensions would ease in the next few quarters, meaning energy markets would return to a normal level. This projection would make oil prices fall drastically, however to me, the likelihood if this is relatively uncertain right now and cannot be accurately predicted.
It was evident throughout the event that the Resolution Foundation was not suggesting that the economy was failing; in several regards, it was presented as positive. The challenges the UK now faces were not overlooked, the continued pressure of inflation and borrowing on the Chancellor was one of the main focuses in fact. They acknowledged these issues along with the forecasted road to recovery, highlighting the governments ambition to continue growth, increase housing supply, and improve public services, but the question remained, how can this be delivered in a sustainable and affordable way. My primary take away was that while the direction is clear, the challenge lies in balancing aspirations with reality, to create long-term economic stability.
