When Rachel Jane Reeves stood before the House of Commons in July 2024 to become the UK’s first female Chancellor of the Exchequer, she promised fiscal discipline and resilience. But now, just over a year later, a quiet but devastating critique is unraveling her economic narrative — and it’s coming from someone who’s been here before. On November 21, 2025, Tax Research UK, the London-based non-profit founded by economist Richard Murphy in 2003, published a scathing analysis titled ‘Rachel Reeves is unravelling’. The piece doesn’t just question her numbers — it says her entire economic worldview is built on sand. And if Murphy is right, the next financial crisis won’t just be costly. It’ll be predictable.
‘We’ll Have to Bail Them Out Again’
Murphy, who also teaches International Political Economy at City, University of London, didn’t pull his claims from thin air. He’s been warning about this since 2008. Back then, as a tax advisor to Labour during the banking collapse, he testified before the Treasury Select Committee that the UK needed a ring-fenced payment platform — one that could survive the failure of any single bank. His proposal? A public infrastructure for payments, independent of private banks’ shaky ledgers. It was rejected. Alistair Darling and Gordon Brown chose bailouts instead. The result? £137.4 billion in taxpayer money poured into Royal Bank of Scotland, Lloyds Banking Group, and HBOS — all while the core payment system, the Faster Payments Scheme PLC, remained vulnerable.
Now, Murphy says history is repeating. The Faster Payments Scheme still processes £1.2 trillion annually across 1,800 institutions. But if one major bank fails — say, Barclays PLC or HSBC Holdings PLC — the whole system could freeze. And Reeves’ budget, Murphy argues, assumes everything will stay stable. ‘The government will need to step in and save the banks,’ he wrote. ‘Because we did not do what I asked the government to do in 2008.’
Reeves’ Assumptions vs. Reality
Reeves has been careful in public. On October 25, 2025, she told the Treasury Committee she was ‘looking at tax and spending to ensure resilience against future shocks.’ At the IMF in Washington on November 12, she pledged to ‘build more resilient public finances — with the headroom to withstand global turbulence.’ But Murphy says those are empty phrases if they don’t confront the structural rot beneath.
He points to the Office for Budget Responsibility’s October 30, 2025, Fiscal Sustainability Report, which flagged £62 billion in unfunded pressures from 2026 to 2027. Climate disruption, aging infrastructure, and energy volatility aren’t abstract risks — they’re fiscal time bombs. Yet Reeves’ projections assume 2.1% annual growth, a figure Dr. Grace Blakeley of the New Economics Foundation called ‘delusional’ on Twitter. ‘Murphy is right,’ Blakeley wrote on November 22. ‘Growth won’t happen if the climate keeps burning.’
Meanwhile, The Guardian’s interactive budget simulator, published on November 20, showed something Reeves hasn’t dared propose: a £25 billion surplus could be achieved by maxing out higher-rate income tax to 45%, introducing a 20% gambling tax, closing capital gains loopholes, and taxing bank profits at 35%. That’s not radical. It’s basic arithmetic. And yet, Reeves’ Autumn Statement — due November 26 — is expected to stick to austerity-lite, avoiding the kind of bold moves that might actually create resilience.
The Banking System Still Has No Safety Net
Here’s the uncomfortable truth: the UK’s banking system is more concentrated than ever. As of September 30, 2025, just three institutions — HSBC, Barclays, and Standard Chartered — held over £5.4 trillion in assets and employed nearly a million people. The system is too big to fail — and too fragile to survive failure.
Murphy’s 2008 warning wasn’t theoretical. It was technical. He proposed a public payment rail, like Canada’s Interac or Sweden’s Bankgirot, that would keep money flowing even if a bank collapsed. Instead, the UK doubled down on private-sector solutions. The result? A system where a single technical glitch or liquidity crisis could trigger a cascade. The Bank of England’s November 2024 Financial Stability Report warned of this. No one listened.
‘Her budget has shown absolutely no imagination,’ Murphy wrote. ‘It’s neoliberal economics on autopilot — assume growth, ignore risk, hope for the best.’
What Happens Next?
The Autumn Statement on November 26 will be Reeves’ first major test. Will she surprise the markets with bold tax reforms? Or will she cling to the old playbook? The answer matters more than ever. The Office for Budget Responsibility will release its independent review on December 3, 2025 — and if it contradicts Reeves’ assumptions, the political fallout could be swift.
Meanwhile, the public is watching. Tax Research UK’s blog post drew 1,247 comments in under 24 hours. Supporters call Murphy a prophet. Critics, like former Conservative minister John Penrose, dismiss him as an alarmist. But the numbers don’t lie. The UK has £62 billion in unfunded liabilities. The payment system is a single point of failure. And the Chancellor’s growth forecasts are based on a world that no longer exists.
Why This Matters to You
If Reeves’ budget collapses — and Murphy’s warnings prove correct — you won’t just see higher taxes. You’ll see delays in public services. Frozen wages. Longer hospital waits. And yes — another taxpayer-funded bank rescue. The last one cost you £2,000 each. This one could cost more. The question isn’t whether the system will break. It’s whether we’ll have the courage to fix it before it does.
Frequently Asked Questions
Why does Richard Murphy’s 2008 warning still matter today?
Murphy’s 2008 proposal for a ring-fenced public payment platform was rejected in favor of bank bailouts. Today, the Faster Payments Scheme — which handles £1.2 trillion annually — still lacks that safety net. If a major bank like HSBC or Barclays fails, the entire system could freeze, forcing another taxpayer-funded rescue. The same structural flaw remains unaddressed.
What’s the difference between Reeves’ fiscal rules and Murphy’s proposed reforms?
Reeves relies on growth assumptions and spending caps to meet fiscal targets, avoiding new taxes on wealth or banks. Murphy argues for structural changes: taxing bank profits at 35%, closing capital gains loopholes, and introducing a gambling tax — measures The Guardian’s simulator shows could generate a £25 billion surplus. His approach targets the root causes of instability, not just symptoms.
Could Reeves’ budget trigger a banking crisis?
Not directly — but it increases the risk. By assuming stable growth and ignoring climate and financial fragility, her budget leaves no fiscal headroom for emergencies. If a bank fails or a global shock hits, the government will have no room to maneuver. That forces a bailout — and the public pays again. The OBR’s December 3 report will reveal whether her assumptions are realistic.
How does climate change factor into this fiscal debate?
The OBR’s £62 billion unfunded liability projection includes climate-related costs: infrastructure damage, energy price spikes, and relocation expenses. Reeves’ 2.1% growth forecast ignores these pressures. Economist Grace Blakeley and Murphy both argue that assuming stable conditions is reckless — climate disruption is already reducing productivity and increasing public spending.
What’s the likelihood of the OBR contradicting Reeves’ budget?
High. The OBR’s October report already flagged £62 billion in unfunded pressures. Reeves’ projections assume growth, low inflation, and no banking stress — all increasingly unlikely. If the December 3 report shows her assumptions are unrealistic, it could trigger market volatility, loss of investor confidence, and pressure for immediate policy shifts — even before the next election.
What would a truly resilient fiscal policy look like?
It would combine three pillars: a public payment rail to prevent banking collapse, progressive taxation on wealth and bank profits to build fiscal buffers, and climate-risk-adjusted budgeting. The Guardian’s simulator proves a £25 billion surplus is possible without austerity. What’s missing isn’t money — it’s political will. Reeves’ budget, so far, lacks all three pillars.