Chancellor says ‘world has changed’
Chancellor Rachel Reeves has warned tax rises are likely in November’s Budget, citing global instability and weaker economic forecasts that have opened up a major hole in the government’s finances.
Speaking ahead of her Labour conference speech in Liverpool, Reeves said the wars in Ukraine and Gaza, higher borrowing costs, Donald Trump’s new tariffs, and a sharp productivity downgrade from the Office for Budget Responsibility (OBR) had forced her to rethink earlier promises.
She insisted that financial markets could be reassured she would “make the numbers add up” and keep to her pledge of fiscal discipline.
£30bn gap to fill
The OBR is expected to deliver its biggest productivity downgrade in years, leaving Reeves with a shortfall of up to £30bn. Around £5bn of that gap has already been created by the government’s retreat on welfare reforms.
Reeves acknowledged the scale of the challenge: “Everyone can see in the last year the world has changed and we’re not immune to that change.”
Although Labour vowed during the election not to raise income tax, national insurance or VAT, critics believe the careful wording leaves scope for increases elsewhere.
Labour turns fire on Reform UK
Reeves’ conference speech will also take aim at Nigel Farage’s Reform UK, which is climbing in the polls. She will accuse the party of preparing a reckless borrowing spree, ripping up Britain’s EU trade deal and threatening stability.
“Who is standing up for Britain’s stability?” she will ask. “A Labour government committed to cutting interest rates and borrowing – or a Reform party that cheered on Liz Truss’s mini-Budget?”
Her remarks follow Prime Minister Sir Keir Starmer branding Farage’s immigration proposals “racist”, a charge Labour says is aimed at policy not voters. Reform has hit back, accusing Labour of failing to listen to public concerns on migration.
Reeves will confirm her plan to cut back OBR forecasts from two to one each year, matching her preference for a single annual fiscal event. She argues this will prevent repeat “fiscal shocks” like the correction she was forced into earlier this year.
The Budget is scheduled for 26 November, when Reeves will set out how she intends to close the gap in Britain’s public finances.
