Reeves says Budget will be ‘fair’ as tax rise speculation mounts

Chancellor Rachel Reeves said she would make “fair choices” in the Budget as economists continue to predict tax rises to balance the books.

Reeves is expected to give a speech in Downing Street ahead of the Budget on 26 November. Labor explicitly rejected an increase in VAT, National Insurance or income tax in its general election manifesto.

Shadow chancellor Sir Mel Stride said in an “emergency press conference” that Reeves had “confirmed what many feared – higher taxes are on the way”. He called for the chancellor to be sacked if he “once again fails to keep his promises”.

Meanwhile, the influential think tank Çözüm Foundation said tax increases were now “inevitable”.

The trust, which has close ties to the Labor Party, warned that avoiding cuts to VAT, NI or income tax would “do more harm than good” – Treasury Secretary Torsten Bell was previously chief executive of the organisation.

He said increasing income tax would be the “best option” to raise cash but suggested this should be offset by a 2p cut to national insurance, which would “raise £6bn in total while protecting most workers from this tax rise”.

Extending the freeze on personal tax thresholds for a further two years beyond April 2028 would also raise £7.5 billion, according to the Autumn Budget 2025 preview.

The Chancellor is expected to say in his speech on Tuesday morning that the Budget will focus on “fairness and opportunity” to reduce NHS waiting lists, the national debt and the cost of living.

“You have all heard a lot of speculation about the choices I will make,” he is expected to say.

“I understand that these are important elections that will shape our economy for years to come.

“But it is important for people to understand the circumstances we face, the principles that guide my choices, and why I believe they will be the right choices for the country.”

Reeves’ message is expected to echo comments Prime Minister Sir Keir Starmer made to a group of Labor MPs on Monday night.

He told those in attendance that the Budget would be “a Labor Budget built on Labor values” and that the government would “make tough but fair decisions to renew our country and build it for the long term”.

The Office for Budget Responsibility (OBR), the government’s official forecaster, is widely Expected to cut productivity forecasts for the UK at the end of the month. This could add up to £20bn to the cost of the Chancellor if he follows his own set of “non-negotiable” rules for government finances.

The two main rules are:

• Not borrowing to finance daily public expenditure by the end of this parliament

• To ensure that the share of state debt in national income decreases by the end of this parliament

The Treasury declined to comment on “speculation” ahead of the OBR’s final forecast to be published with the Budget on 26 November.

But last week the chancellor confirmed both tax increases and spending cuts These options are available because it aims to provide itself with “sufficient room for maneuver” against future economic shocks.

The Resolution Foundation said changes to the economic outlook and policy U-turns could turn the current £9.9bn loophole from the Chancellor’s borrowing rule into a financial black hole of around £4bn.

This encouraged Reeves to double the level of headroom he had to £20bn, against his financial rules. The budget preview said this would “send a clear message to markets that we are serious about fixing our public finances, which will reduce medium-term borrowing costs and make future fiscal events less worrying.”

This comes after the Institute for Fiscal Studies (IFS) said last month there was a “strong case” for increasing headroom. He said the lack of a larger buffer brought instability and he could leave the Chancellor. “limping from one guess to the next”.