Rachel Reeves to set out Budget priorities as major think tank warns tax rises are ‘inevitable’

Tax rises are “inevitable”, a leading think tank has warned, hours before Rachel Reeves announces her Budget priorities.

The Chancellor will give a speech today, paving the way for sweeping tax increases expected to be announced at the end of the month, and promising to make “important choices that will shape our economy for years to come”.

In a major pre-budget speech, he will set out his three priorities for fiscal efficiency: reducing hospital waiting lists, the national debt and the cost of living.

The Solution Foundation said it was a way to implement “inevitable” tax increases that would “increase confidence in the economy and public finances, while also reducing child poverty and the cost of living”.

Ms Reeves is expected to promise a Budget “guided by the values ​​of this government, fairness and opportunity, and focused squarely on the priorities of the British people”.

Acknowledging growing speculation over possible tax rises, she will argue that it is important the public understands the circumstances facing the country.

In its pre-budget review, the Resolution Foundation said the Chancellor should aim to double his fiscal share in his statement to the House of Commons on 26 November.

This would result in the buffer against unexpected changes in economic downside rising to £20bn, although the think tank conceded a £15bn increase was “perhaps” more realistic.

“This would send a clear message to markets that it is serious about fixing public finances, which would reduce medium-term borrowing costs and make future financial events less worrying,” the report said.

Tax-boosting measures could include freezing personal thresholds, potentially raising £7.5bn if carried out over two years, as well as “pro-growth” reforms to the tax system targeting wealth, car and property taxes, according to the foundation.

“So, while tax increases are inevitable, there is a way to do them that will increase confidence in the economy and public finances, while also reducing child poverty and the cost of living.”

It was also stated that ministers should also consider new targeted policy measures to help with the cost of living crisis, such as help with energy bills.

The Chancellor’s speech will come after weeks of expectation management and mounting reports of planned tax rises as he tries to fill a black hole of up to £50bn in the public finances to balance the books and uphold his golden rule of funding day-to-day spending with tax revenue.

On Monday, a Downing Street spokesman said he would explain “the clear choices we face: either investment and hope or cuts and division” – apparently a nod to the threat posed by Reform UK.

The Chancellor warned of “tough global headwinds” damaging the UK economy and argued Brexit was having a bigger impact than critics predicted.

Further fueling speculation about tax rises, Sir Keir Starmer last week refused to stand by Labour’s manifesto pledge not to increase VAT, income tax or national insurance paid by working people.

He has previously said the party’s commitment to voters ahead of the 2024 general election is “valid” but did not repeat that assurance in the House of Commons. The press secretary also avoided using this statement.

Its spokesman on Monday failed to clearly define “working people” when pressed on the issue, saying instead: “Workers know who they are. We are committed to making their lives better by growing the economy, strengthening defense at home and raising living standards.”

They added that working people are “people across the country who work hard, who don’t get what they deserve, who don’t have the savings to get themselves out of trouble.”

“The government has been very clear about the choices we face on this budget; we will be honest about the scale of the challenge we face.”

Speaking on Tuesday, the chancellor will say: “As chancellor, I will present my second budget later this month. In this budget, I will make the choices necessary to create strong foundations for our economy this year and for years to come.”

“This will be a budget guided by the government’s values ​​of fairness and opportunity and focused squarely on the priorities of the British people – protecting our NHS, reducing our national debt and improving the cost of living.”

He will add: “You have all heard a lot of speculation about the choices I will make. I understand that; these are important choices that will shape our economy for years to come. But it is important that people understand the circumstances we face, the principles that guide my choices, and why I believe they will be the right choices for the country.”

The Office for Budget Responsibility (OBR), which delivered its latest forecasts for the economy to the chancellor last week, is expected to downgrade the UK’s productivity performance in the Budget amid fears it could represent an additional £20bn shortfall in the public finances.