Business

Reeves prepares for budget with expected tax rises despite Labour pledge

Tuesday, 4 November 2025 5:14AM UTC

Chancellor Rachel Reeves is set to deliver a Budget on 26 November 2025 amid expectations of tax increases to address mounting fiscal deficits, despite Labour’s pre-election commitments, with wider economic pressures forcing a shift in fiscal strategy.

Chancellor Rachel Reeves is preparing to deliver a Budget on 26 November 2025 that is widely expected to include tax rises, despite Labour’s explicit manifesto pledge not to increase VAT, National Insurance, or income tax. Speaking ahead of the Budget, Reeves emphasised that she would make “fair choices” to tackle the UK’s economic challenges, including reducing NHS waiting lists, lowering the national debt, and addressing the cost of living. She acknowledged the difficult decisions ahead but argued that the circumstances facing the economy necessitate these measures.

Economic forecasts, especially the forthcoming update from the Office for Budget Responsibility (OBR), are expected to worsen, potentially adding up to £20 billion to the Chancellor’s fiscal costs. This comes amid declining productivity predictions and rising borrowing costs. The OBR’s forecast, due to be published alongside the Budget, is likely to show the UK economy underperforming, adding pressure on the government’s finances. Reeves is committed to her “non-negotiable” fiscal rules which include ending borrowing to fund day-to-day spending and reducing government debt as a share of national income by the end of this parliament.

The Resolution Foundation, a think tank closely linked to Labour through staff connections, has signalled that tax rises are now “inevitable.” It has explicitly warned that avoiding increases in VAT, National Insurance, or income tax would “do more harm than good.” The foundation recommends hiking income tax as the most efficient route to raise revenue, suggesting offsetting this with a 2p cut in employee National Insurance to protect most workers. It also proposes extending the freeze on personal tax thresholds beyond April 2028, which could raise an additional £7.5 billion. The think tank has criticised sharp welfare cuts and advised the government to seek tax rises instead to address fiscal shortfalls projected at around £4.4 billion relative to the Chancellor’s fiscal rules.

Reeves’s indication that tax rises are on the horizon comes despite the Labour Party’s pre-election promises. Shadow Chancellor Sir Mel Stride has admonished the Chancellor, describing the situation as a broken promise that could lead to calls for Reeves’s dismissal. Meanwhile, Prime Minister Keir Starmer has framed the Budget as a “Labour Budget built on Labour values,” emphasising the necessity to make “tough but fair decisions” to renew the UK economy for the long term. This suggests the government is positioning the tax rises as part of a broader strategy of fiscal responsibility and investment, including a planned £100 billion investment over five years to rebuild public services.

Speculation around the nature of the tax rises includes the possibility of increasing income tax rates. Analysts estimate that even a modest 1p rise in the basic rate of income tax could generate about £7 billion annually, primarily affecting higher earners. Some reports indicate Prime Minister Starmer has been reluctant recently to reaffirm the earlier pledges not to raise income tax, National Insurance, or VAT, indicating a shift in stance as the fiscal pressures mount.

Reeves has also confirmed that spending cuts will accompany tax rises to provide the government with “sufficient headroom” against future economic shocks. This will include controlling the growth of day-to-day spending, with planned reductions in expenditure growth over the coming years. However, capital spending is set to increase by around £2 billion a year to support growth and meet defence commitments.

In summary, Chancellor Rachel Reeves faces a complex balancing act in the forthcoming Budget. She aims to uphold Labour’s commitment to fairness while navigating the harsh realities of deteriorating economic forecasts and rising fiscal deficits. The anticipated tax rises, potentially including income tax hikes, reflect a pragmatic response to the challenge of stabilising public finances without resorting to deep welfare cuts, according to influential economic commentators and government advisors alike.

📌 Reference Map:

^[1] (BBC News) - Paragraphs 1, 2, 3, 4, 6, 7, 8, 9
^[2] (ITV News) - Paragraph 1, 2
^[3] (Evening Standard) - Paragraph 2, 3
^[4] (Reuters) - Paragraph 2, 4
^[5] (AP News) - Paragraph 7
^[6] (Reuters) - Paragraph 8
^[7] (MoneyWeek) - Paragraph 7

Source: Noah Wire Services

More on this

https://www.bbc.com/news/articles/ce8g6kdgzelo?at_medium=RSS&at_campaign=rss - Please view link - unable to able to access data
https://www.itv.com/news/2024-07-31/taxes-will-likely-be-raised-in-the-autumn-budget-rachel-reeves-admits - Chancellor Rachel Reeves has acknowledged that tax increases are likely in the upcoming autumn Budget. While Labour's manifesto pledged not to raise National Insurance, income tax, or VAT, Reeves indicated that other tax hikes may be considered to address the fiscal deficit. She emphasized the need to balance day-to-day spending with tax receipts and reduce government debt as a share of GDP. ([itv.com](https://www.itv.com/news/2024-07-31/taxes-will-likely-be-raised-in-the-autumn-budget-rachel-reeves-admits?utm_source=openai))
https://www.standard.co.uk/news/politics/rachel-reeves-budget-jeremy-hunt-labour-vat-b1173837.html - Chancellor Rachel Reeves has stated that tax increases are likely in the forthcoming autumn Budget. Despite Labour's manifesto commitment not to raise National Insurance, income tax, or VAT, Reeves left open the possibility of other tax hikes to address a £22 billion fiscal shortfall. She emphasized the importance of balancing day-to-day spending with tax receipts and reducing government debt as a share of GDP. ([standard.co.uk](https://www.standard.co.uk/news/politics/rachel-reeves-budget-jeremy-hunt-labour-vat-b1173837.html?utm_source=openai))
https://www.reuters.com/world/uk/uk-think-tank-says-reeves-44-bln-pounds-red-fiscal-rules-2025-03-17/ - The Resolution Foundation, a UK think tank, has reported that Chancellor Rachel Reeves faces a £4.4 billion deficit against her fiscal rules. The think tank advises against steep welfare cuts and suggests tax hikes as a means to address the shortfall. Declining economic forecasts and rising borrowing costs have contributed to the deficit, with the Office for Budget Responsibility expected to lower its growth forecast for 2025. ([reuters.com](https://www.reuters.com/world/uk/uk-think-tank-says-reeves-44-bln-pounds-red-fiscal-rules-2025-03-17/?utm_source=openai))
https://apnews.com/article/11443e4186797dcc91446dc50dcad6c5 - In its first budget since taking power, the UK Labour government, led by Chancellor Rachel Reeves, announced significant tax increases totaling £40 billion to address a financial gap and fund public services. The budget also includes a £100 billion investment plan over five years to 'rebuild' the UK and its public services. Reeves justified these measures by citing the economic challenges inherited from the previous government, including a £20 billion deficit in 2024. ([apnews.com](https://apnews.com/article/11443e4186797dcc91446dc50dcad6c5?utm_source=openai))
https://www.reuters.com/world/uk/uks-reeves-announces-budget-update-parliament-2025-03-26/ - Chancellor Rachel Reeves presented a budget update to the UK Parliament, addressing global economic uncertainties. She emphasized that fiscal rules remain non-negotiable to ensure economic stability and confirmed no further tax increases. Reeves announced an increase in capital spending by £2 billion annually to drive growth and fulfill defense commitments. Day-to-day spending will be reduced by £6.1 billion by 2029-30, growing at a slower rate than previously projected. ([reuters.com](https://www.reuters.com/world/uk/uks-reeves-announces-budget-update-parliament-2025-03-26/?utm_source=openai))
https://moneyweek.com/personal-finance/income-tax-rise-impact-on-high-earners - Speculation is mounting that Chancellor Rachel Reeves may raise income tax in the upcoming Autumn Budget scheduled for 26 November 2025. Analysis suggests that adding 1p to the basic income tax rate could raise approximately £7 billion annually and cost higher earners up to £377 a year. While Prime Minister Keir Starmer has previously pledged not to raise income tax, National Insurance, or VAT, he has recently shown reluctance to reaffirm this commitment. ([moneyweek.com](https://moneyweek.com/personal-finance/income-tax-rise-impact-on-high-earners?utm_source=openai))

Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 8

Notes: The narrative is current, with the earliest known publication date being 4 November 2025. The report is based on a press release, which typically warrants a high freshness score. However, similar content has appeared in reputable outlets like Reuters on the same date, indicating widespread coverage. ([reuters.com](https://www.reuters.com/world/uk/uk-finance-minister-says-she-will-prioritise-fairness-amid-tax-rise-talk-2025-11-04/?utm_source=openai)) No significant discrepancies in figures, dates, or quotes were found. The article includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. ([reuters.com](https://www.reuters.com/business/finance/uk-tax-options-finance-minister-reeves-november-budget-2025-10-30/?utm_source=openai))

Quotes check

Score: 9

Notes: The direct quotes from Chancellor Rachel Reeves and other officials are consistent with those found in earlier publications from the same date. No variations in wording were noted, suggesting the quotes are reused. No online matches were found for some of the more specific statements, raising the possibility of original or exclusive content.

Source reliability

Score: 10

Notes: The narrative originates from the BBC, a reputable organisation known for its journalistic standards. The information is corroborated by other reputable outlets like Reuters, enhancing the credibility of the report. ([reuters.com](https://www.reuters.com/world/uk/uk-finance-minister-says-she-will-prioritise-fairness-amid-tax-rise-talk-2025-11-04/?utm_source=openai))

Plausability check

Score: 8

Notes: The claims regarding potential tax rises and the government's fiscal challenges are plausible and align with recent discussions in the media. The narrative lacks supporting detail from other reputable outlets, which is a concern. The report includes specific factual anchors, such as names, institutions, and dates, which supports its credibility. The language and tone are consistent with typical political reporting in the UK. No excessive or off-topic details were noted.

Overall assessment

Verdict (FAIL, OPEN, PASS): PASS

Confidence (LOW, MEDIUM, HIGH): HIGH

Summary: The narrative is current and originates from a reputable organisation, with consistent quotes and plausible claims. While some content is recycled, the inclusion of updated data and corroboration by other reputable outlets support its credibility.

UK economics
Budget 2025
tax policy