Delivering a pre-Budget speech at Downing Street, Reeves did not directly state that she would increase taxes in her bid to fix the UK’s economy, tackle poor productivity, improve cost-of-living conditions and reduce inflation, but when questioned, she did not rule it out.
Instead, she said it was her “job to deal with the world as we find it, not the world as I wish it would be”. This meant she must make “hard choices”, adding that she “could not always do what was popular” but instead had to do what was “right”.
Reeves said since the last Budget, the world has faced even more challenges, such as the ongoing threat of tariffs, volatile global supply chains and the need to boost defence spending.
On top of that, she said the UK economy was not working as it should and productivity performance was weaker than previously thought.
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Labour’s manifesto pledge
The Chancellor would not be drawn into discussing the specific measures contained in her Budget, only adding that it would be a “Budget for growth with fairness at its heart,” while also stating that “we all have to contribute”.
One of the Labour Party’s key manifesto pledges was that it would not increase taxes on working people, specifically naming National Insurance, basic, higher or additional rates of income tax and VAT.
But Reeves has repeatedly refused to rule out tax increases in the weeks leading up to the Budget.
When questioned by Chris Mason, the BBC’s political editor, over whether she was set to break the manifesto promise not to raise income tax, Reeves said specific policy choices would be set out on 26 November.
Instead, she said she wanted people to understand the challenges facing the government. Public debt, said the Chancellor, is now £2.9trn – the equivalent of 95% of GDP, which meant that £1 in every £10 of taxpayers’ money was spent on debt interest alone.
Laying ‘groundwork’ for tax rises
Reacting to Reeves’ pre-Budget speech, Charlotte Kennedy, chartered financial planner at Rathbones, said: “The Chancellor’s pre-Budget speech effectively lays the groundwork for tax rises, seemingly intended to soften the blow at the end of the long run-up to the Budget.
“Over the past few weeks, client concerns have centred on pensions, income tax and inheritance tax, as it has become increasingly clear that trimming around the edges won’t be enough to address the multibillion-pound shortfall in public finances – a gap that has only widened during the extended lead-up to the Budget.”
Rachael Griffin, tax and financial planning expert at Quilter, added: “She knows this Budget will define her credibility, and her message today was clear that Britain’s finances are in a worse state than many realise, and everyone will be expected to play their part in putting them back on track.
“Reeves was at pains to distance herself from the politics of austerity, arguing that deep cuts and short-term fixes are what weakened the country’s economic foundations in the first place. But while her argument against renewed austerity will appeal to many scarred by the last decade, it also lays the groundwork for a different kind of pain, which is higher personal taxes to rebuild public finances. She’s made it clear she is happy to be unpopular if it helps secure public finances.”
Griffin said Reeves’ insistence that ‘easy answers’ were off the table was a warning that there will be few giveaways in this Budget. Griffin noted that the Chancellor is trying to convince both markets and the public that fiscal discipline can coexist with fairness.
“For households already facing high borrowing costs and squeezed budgets, the idea of contributing more will still be a tough sell.
“The real challenge for Reeves will come when she has to translate that rhetoric into decisions that feel credible to investors but also tolerable for working families,” she added.
