Embattled Rachel Reeves emerges from hiding today to lay ground for promise-breaking Budget betrayal – and, as ever, it won’t be her fault

Rachel Reeves will issue a new tax warning on Tuesday amid growing speculation she is preparing to tear up Labor’s manifesto by increasing income tax.

In a highly unusual move, the Chancellor will address ‘speculation’ about the contents of the 26 November Budget, which is expected to increase taxes by up to £30bn, in an early morning speech in Downing Street.

Ms Reeves has been hiding from the media since the Daily Mail revealed last week that she had broken the law by failing to obtain a license to rent her family’s home.

But the beleaguered Chancellor will finally reveal his identity on Tuesday to warn that the public finances are in a worse state than previously acknowledged.

Despite the economy’s dire state, Ms Reeves will rule out spending restrictions, arguing more ‘investment’ is needed to stimulate the economy and support public services.

Downing Street said it would ‘set out the clear choice we face: investment and hope or cuts and division.’

Sir Keir Starmer warned Labor MPs on Monday night that the Budget would involve ‘difficult and serious decisions’ but insisted they would be ‘fair’.

No 10 refused to say whether Labour’s manifesto not to increase income tax, VAT or National Insurance was still valid.

The Conservatives called on the Prime Minister on Monday night to sack the Chancellor if Labor fails to meet its tax commitments to the country.

The Chancellor will make an early morning speech in Downing Street to address ‘speculation’ about the contents of the 26 November Budget

Photograph of the Labor Party publishing its general election manifesto in June 2024

Shadow Chancellor Sir Mel Stride said: ‘It took Rachel Reeves more than a year to accept that her first Budget had failed. Now, with an emergency press conference, he confirms what many feared: Higher taxes are on the way.

‘If Rachel Reeves breaks her promise once again, Keir Starmer must take responsibility and sack her. The country needs a Chancellor with a plan and a backbone.’

Ms Reeves is considering a proposal by the Left-Wing Resolution Foundation to increase income tax by 2p; This will be the first increase in the basic tax rate for 50 years.

The move could be partly offset by a 2 per cent cut to National Insurance but would still raise an extra £6bn a year from pensioners and others.

He also wants to drag millions into higher tax bands by extending the six-year freeze on tax thresholds, despite previously warning that the move would break Labor’s manifesto promise.

The Resolution Foundation, which used to house a number of ministers and advisers who prepared the budget, said on Monday night that tax increases were ‘inevitable’ and the total was likely to be around £26bn.

After raising a record £40bn in taxes in last year’s budget, Ms Reeves said she had ‘swept everything away’.

Following a backlash from the business community, he told the CBI last November: ‘I’m really clear. ‘I’m not coming back with more debt or more taxes.’

However, low growth and high public borrowing costs triggered a deterioration in public finances.

Sir Keir Starmer, pictured last month, warned Labor MPs on Monday night that the Budget would involve ‘difficult and serious decisions’ but insisted they would be ‘fair’

Some experts have attributed this decline in part to the first Budget, which introduced a £25bn ‘business levy’ on employers’ National Insurance.

But Ms Reeves will once again try to blame the last Conservative government and Brexit for her plight.

Sir Keir told a special meeting of the Parliamentary Labor Party in Westminster on Monday night that ‘it has become clearer that the long-term impact of the Tories’ austerity, the failed Brexit deal and the pandemic on Britain’s productivity are even worse than we feared.’ Faced with this, we will make difficult but fair decisions to renew our country and build it for the long term.’

On Tuesday, Ms Reeves will pledge to ‘make the choices necessary to create strong foundations for our economy’.

It will add: ‘This will be a Budget based on 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 added that it was important that ‘people understand the circumstances we face and the principles that guide my choices’.

Reform leader Nigel Farage warned on Monday that Britain could face ‘economic collapse’ within two years as a result of malpractice by successive governments.

Conservative leader Kemi Badenoch will urge the Chancellor to cut the bloated benefits bill rather than raise taxes further in a speech on Tuesday.

Conservative leader Kemi Badenoch will call on the Chancellor to cut bloated benefits bills rather than raise taxes further in a speech on Tuesday

He will also call on Labor to withdraw the Employment Rights Bill, warning it would further damage jobs and growth.

Ms Reeves has not been seen in public since this newspaper revealed she was renting her south London home for £3,200 a month without the necessary licence.

He said he was initially unaware he needed a ‘selective’ license for the property. But emails between her husband and the rental agency showed that the couple had been informed of this requirement.

Despite this, Sir Keir rejected calls for a formal investigation into the dispute.