Chancellor Rachel Reeves has delivered an unusual pre-Budget press conference at which she strongly implied there will be tax rises in the speech on 26 November.
Speaking to reporters in Downing Street at what the government described as a “Budget scene setter”, Reeves said although she spent her first year in government “fixing the foundations” of the economy and putting the “public finances back on a firm footing”, big issues remain.
Blaming “years of economic mismanagement” under the Conservatives and “dealing with the aftermath of Liz Truss’s disastrous mini Budget”, the chancellor said “the world has thrown even more challenges”.
She added: “The continual threat of tariffs has dragged on global confidence, deterring business investment and dampening growth.
“Inflation has been too slow to come down, supply chains continue to be volatile, meaning the costs of everyday essentials remain too high and the cost of government borrowing has increased around the world, a shift that Britain – with our high levels of debt left by the previous government – has been particularly exposed to.”
Reeves also pointed to a “rushed and ill-conceived Brexit” that meant the UK was “underprepared” for the COVID pandemic, while poor productivity “inherited” from the previous government is “worse than previously thought”.
She said her commitment to fiscal rules to “break the cycle of low productivity and low growth” is “iron clad”.
The chancellor stressed “it will be a Budget led by this government’s values, of fairness and opportunity and focused squarely on the priorities of the British people”.
She continued: “You will all have 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 are facing, the principles guiding my choices – and why I believe they will be the right choices for the country.”
Reeves said to “build the future of Britain” everyone needs to “contribute to that effort” and “each of us must do our bit for the security of our country and the brightness of its future”.
Questioned by reporters about whether she would break Labour’s general election manifesto commitment to not raise income tax, National Insurance or VAT for “working people”, Reeves refused to rule it out.
She said: “As chancellor, I have to face the world as it is, not the world as I want it to be. And when challenges come our way, the only question is how to respond to them, not whether to respond or not.
“As I respond at the Budget on 26 November, my focus will be on getting NHS waiting lists down, getting the cost of living down and also getting the national debt down.”
Reaction to Rachel Reeves’ pre-Autumn Budget speech
Jonny Haseldine, head of business environment policy at the British Chambers of Commerce, said:
“Business shares the government’s ambition to grow the economy, reduce inflation and boost productivity. However, none of that is possible if costs continue to pile up on firms.
“That’s why our message is clear – no more tax on business. The chancellor spoke this morning about choices, hitting firms in the pocket once again would be the wrong choice.
“Our latest research shows business confidence and investment levels continue to suffer. A fifth of firms are expecting lower turnover for the next year, and a quarter have scaled back investment plans.
“Improving the business landscape requires a Budget that boosts trade, tackles the skills problem and turbocharges infrastructure.
“Firms across the UK are already feeling bruised and many are struggling to keep their heads above water. November 26th is a make-or-break moment for British business – the Budget must deliver.”
George Holmes, managing director of Aurora Capital, said:
“Businesses need clarity, but all they got today was a warning shot from the chancellor. Rachel Reeves’s refusal to rule out tax hikes throws yet more uncertainty into the mix just as small business confidence was beginning to stabilise.
“Talk of “necessary choices” and “everyone doing their bit” sounds like code for squeezing taxpayers, including thousands of owner-managed firms already dealing with rising costs.
“If the government walks back a key manifesto pledge within 18 months of taking office, it could stall hiring, investment, and growth plans across the SME sector. Small firms can’t make long-term decisions when policy is uncertain. And with cash flow already under pressure, any increase in income tax or national insurance would hit sole traders and small company directors hardest.
A “Budget for growth” cannot be built on the backs of small businesses. If the chancellor is serious about long-term stability, she needs to support productivity by investing in the SME backbone of the economy, not by taxing it into paralysis.”
Karim Fatehi, CEO of the London Chamber of Commerce and Industry, said:
“The chancellor has made it clear this morning that businesses and individuals can expect tax rises in the impending Budget. Our members need a Budget that backs businesses, not one that burdens them. A Budget that provides firms with the stability and confidence to invest, export, and create jobs, rather than adding to the pressures they already face.
“Further tax rises would be deeply damaging to both London and the wider UK economy. Our latest survey shows that six in 10 firms (61%) believe additional tax increases would harm growth, while nearly half (43%) say they would be forced to raise prices, fuelling inflation.
“Businesses need a stable, predictable tax system that encourages investment, not one that piles on costs through higher taxes or outdated business rates. In London, rates are already among the highest in the country, holding back growth and job creation.”
Daniel Woolf, head of policy at Enterprise Nation, said:
“There’s real trepidation among small businesses ahead of this Budget. Everyone can see tax rises are coming, but what small firms need now are confidence-boosting measures that help them grow.
“After a difficult year, this Budget must show that government recognises their role in driving the recovery, not risk dampening the ambition that keeps the economy moving.”
Paul Robbins, director of tax at Croner-i, said:
“Reading between the lines of this morning’s speech, it seems the chancellor is bowing to pressure and paving the way for tax rises. This follows calls from many organisations for Rachel Reeves to be upfront with the electorate and admit that taxes will have to rise in the coming Budget.
“If the OBR downgrades its productivity forecast as expected, there could be a further £20bn hit to the economy, bringing the potential shortfall to around £30bn and making it all but impossible for Mrs Reeves to maintain her self-imposed government finance rules without cutting spending, increasing taxes, or both.
“Despite Labour’s (in hindsight, increasingly ill-advised) pre-election manifesto promise not to raise taxes for working people, the lack of financial ‘headroom’ means something will clearly have to give. Whilst the chancellor has not directly said so, she used this morning’s speech to assert that she is prepared to make the ‘necessary choices’ and refused to rule out tax rises. In political terms, such a refusal is effectively an admission of the inevitable.
“The coming Budget is set to be a politically defining moment for the current government. Maybe it is time to rip off the plaster from our ailing economy and let some air get to the wound.”
Nigel Green, chief executive of deVere, said:
“Governments test language carefully before they act. When ministers refuse to repeat categorical assurances, it’s deliberate. This is choreography. The message, we believe, is pretty clear: tax rises are coming. Get ready.
“Her speech was as much about managing expectations as setting direction.
“It was timed before markets opened to reassure investors about fiscal discipline while preparing taxpayers for what’s next.
“The arithmetic is brutal. Debt servicing costs remain elevated, productivity has been downgraded, and growth is stagnant. Something has to give, and that something is tax policy.
“The narrative has turned from optimism to obligation. The framing around ‘fairness’ and ‘opportunity’ always precedes structural shifts in taxation.
“It softens the ground for measures that raise revenue without seeming to break manifesto language too severely.
“Freezes to inheritance thresholds, reductions in higher-rate pension relief, tighter dividend allowances, or alignment of capital gains with income tax can all be described as modernisation.
“But they amount to the same thing: a heavier burden on savers and investors.”
Vipul Sheth, managing director of Advancetrack, said:
“Small and medium-sized firms drive revenue, innovation and jobs, and are a core part of growth within the UK economy – they always have been. But sadly, the government’s current fiscal policy feels like it is placing even more pressure on exactly these organisations, stifling their potential for growth and demotivating UK business leaders.
“The rise in Employers’ National Insurance Contributions, coupled with the uptick in the National Minimum Wage, has already pushed many firms to the brink in terms of investment and recruitment. I fear that any further tax rises will only accelerate an exodus of business leaders who decide the UK is no longer the place to build their future, a move that could be catastrophic for our economy.
“I’ve worked hard to grow my organisation and build a legacy, but I am starting to see fewer leaders in that position – and the brain-drain within business is becoming inevitable. It’s time for the government to start seeing UK business as the engine of growth, productivity and opportunity that it truly is – and stop penalising them through sustained tax hikes.”
Catherine Heyes, head of tax at PKF Littlejohn, said:
“With this morning’s unusual pre-Budget speech, the chancellor is paving the way for substantial tax increases at the end of the month. Although swerving any questions on what these might be, it seems likely that a manifesto pledge will be broken and the strongest contender looks like an increase to income tax.”
Jamie Roberts, managing partner at YFM Equity Partners, said:
“It felt like tax rises are being framed as unavoidable, maybe that is right as the level of debt and cost of interest is so high and there is no short term fix to this other than tax rises, but sustained growth rarely comes from taxation and today’s words seems to ignore the long term risk of making it less attractive to create businesses in the UK.
“Entrepreneurs, founders, and business leaders, like everyone else, are feeling the strain of slower productivity and high inflation. If the UK wants to improve productivity and drive growth over the medium term, then it must continue to back the entrepreneurs starting and running businesses – these are the people creating jobs and prosperity for all. The UK is still the best place in the world to start and run a business with tax incentives to drive investment (Venture Capital trust and EIS), a world leading legal system and a huge pool of talent, but we risk eroding that edge if we keep targeting the very people we need to build businesses and create employment.
“I’m hoping that as well as the now expected tax rises that the chancellor signals that Britain remains a place where people are rewarded for building businesses and creating jobs to deliver long-term prosperity.”