Rachel Reeves has “no regrets” over potential breaches of Labour’s manifesto pledge not to raise certain taxes in the upcoming Budget, her spokesperson said.
It comes as the pound has fallen to a six-month low after Ms Reeves refused to rule out hiking taxes to plug a hole in the public finances in the pre-Budget address on Tuesday morning.
Sterling fell 0.3 per cent to $1.3064 - its weakest since April. The FTSE 100 Index meanwhile fell deeper into the red after the speech, down 1 per cent or 92.5 points lower at 9608.9.
The chancellor refused to rule out breaking Labour’s manifesto pledge not to raise income tax, VAT or National Insurance – saying “each of us must do our bit” as she paved the way for tax rises in her Budget later this month.
A leading think tank has warned that tax rises are “inevitable”, but said there was a way to implement them that “boosts confidence in the economy and the public finances, while also reducing child poverty and the cost of living”.
Following the speech, Sir Keir Starmer’s spokesperson backed Ms Reeves and pointed to “fresh challenges”, including tariffs deterring business investment and dampening growth, high inflation and the increasing cost of borrowing.
Key Points
- Reeves sets stage for tax rises in unorthodox pre-Budget speech
- Reeves refuses to rule out tax rises
- Badenoch criticises chancellor's 'waffle bomb' speech
- Reeves acknowledges tax speculation in pre-Budget speech
- Tax rises 'inevitable' leading think tank warns
- Economists urge Reeves to make ‘difficult’ choices to boost market confidence
It would be 'irresponsible' to pursue the 'easy answers', says Reeves
16:50
,
Shaheena Uddin
The Independent’s political correspondent Millie Cooke reports:
Rachel Reeves has argued it would be irresponsible to pursue the easy answers, insisting "politicians of recent years have become addicted to shelling out for short term sticking plaster solutions rather than making long-term economic plans".
In yet another hint that she will take painful decisions at November's budget, Ms Reeves said that while she "understands the urge for easy answers", such a move would be irresponsible.
Farm Inheritance Tax plan was the 'right decision' treasury ministers say
16:20
,
Shaheena Uddin
Farmers will be taxed on inheritance next year, as treasury ministers have stood by their previous decision.
The Government made "the right decision" at last year's budget to end a full tax relief for farmers, when they pass on agricultural property, Exchequer Secretary, Dan Tomlinson said.
This will involve farm landowners paying inheritance tax at an effective rate of up to 20 per cent on their farm land from April 2026, but means they can pass on agricultural and business estates worth up to £1 million without facing a bill.
Labour backbenchers called on Mr Tomlinson to look at tweaking the plan, based on a report by the Centre for the Analysis of Taxation (CenTax).
CenTax suggested a "minimum share rule", so that landowners whose farms and businesses make up a small share of their estate - less than 60% - would see an increased tax rate.
This could fund an exemption from paying inheritance tax on land worth up to £5 million, the think tank found.
Economists urge Reeves to make ‘difficult’ choices to boost market confidence
16:00
,
Nicole Wootton-Cane
Rachel Reeves has been urged to make “difficult” choices by economists ahead of the Budget later this month.
The chancellor has to plug a shortfall of around £22bn, according to some estimates, to restore faith in the British economy.
Experts have now warned she should aim to double her fiscal headroom to reassure markets that the Government was focused on economic stability.
Afghan data leak superinjunction left democracy in ‘deep freeze’, say journalists
15:34
,
Shaheena Uddin
Journalists have attacked the previous government’s “Orwellian leap” in the use of a gagging order to cover up a massive data leak which potentially put more than 100,000 Afghans at risk.
The superinjunction used by the Ministry of Defence (MoD) followed the February 2022 leak of details of thousands of Afghans, who feared they were in danger from the Taliban because of their links to UK forces and wanted to apply for sanctuary in Britain.
The Independent’s home affairs correspondent Holly Bancroft was among the journalists praised for their ‘grit and determination’ in exposing the saga.
Watch: Rachel Reeves refuses to rule out hiking income tax, VAT or National Insurance in Budget
15:31
,
Shaheena Uddin
Rachel Reeves, said: “As Chancellor, I have to face the world as it is, not the world that I want it to be.
“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 the 26th of November, my focus will be getting NHS waiting lists down, getting cost of living down and also getting the national debt down.”
Recap: How could inheritance tax change at the Budget?
15:30
,
Nicole Wootton-Cane
Rachel Reeves has refused to rule out raising taxes in this month’s Budget - despite Labour promises to freeze them.
The chancellor has said that she will not be making “easy choices” at the fiscal event on 26 November, after research by the Institute for Fiscal Studies (IFS) indicated she may need to find at least £22bn to shore up the economy.
One tax that could see increases without Labour breaking its manifesto pledges is inheritance tax.
Albert Toth has taken a look at the potential changes...
Kemi Badenoch brands Rachel Reeves’ pre-Budget speech ‘one long waffle bomb’
15:00
,
Nicole Wootton-Cane
Kemi Badenoch has called Rachel Reeves’ speech this morning “one long waffle bomb”.
The leader of the Conservative Party said the address was a “laundry list of excuses” while giving her own speech in London on Tuesday.
Mrs Badenoch said Ms Reeves had delivered “a masterclass in managed decline” that left business leaders and investors “confused” because “Labour doesn’t have a plan to get Britain working”.
You can read more below...
Scottish Labour leader says he will cut income tax if elected
14:30
,
Nicole Wootton-Cane
The leader of Labour in Scotland has refused to say whether Rachel Reeves will break the party’s manifesto commitment not to raise taxes - but added he would cut it in Scotland if elected.
Anas Sarwar said taxpayers will have to “wait and see” what is in the Chancellor’s Budget on November 26.
Asked if he can guarantee Labour will not break its manifesto pledges, Mr Sarwar told the PA news agency: “Let’s wait and see what’s in the Budget in a few weeks’ time.
“She is the UK Chancellor that’s responsible for income tax in England and Wales.
“Income tax in Scotland is the responsibility of the Scottish Government, and actually the only person that’s been campaigning loudly for the last two years for a rise in income tax in England and Wales is John Swinney, and he’s the very same man negotiating the fiscal framework.”
Income tax in Scotland is currently higher for middle and higher earners compared to those living in England.
Mr Sarwar said taxes are “too high” in Scotland and he is “clear” Scottish Labour will bring down the tax burden if the party wins next year’s Scottish election.
Chancellor has 'no regrets' if Labour break promise not raise taxes in Budget
14:00
,
Nicole Wootton-Cane
Rachel Reeves does not regret potential breaches of Labour’s manifesto promise not to raise certain taxes, her spokesman said.
Asked whether she does, a spokesman for the Chancellor told reporters: “No. And again, I think she’s been asked this question previously.
“Those manifesto commitments were made because we recognised that working people had been asked to pay the price of 14 years of Conservative failure.”
Pressed on concerns that breaking manifesto pledges could further erode public trust in politicians, Sir Keir Starmer’s spokesman said: “Voters put their trust in Government to make tough decisions, not just popular ones.
“We’ll do whatever is necessary to protect families from high inflation and interest rates, protect our public services and guarantee the investment necessary for our economic future.”
The official pointed to “fresh challenges”, including tariffs deterring business investment and dampening growth, high inflation and the increasing cost of borrowing.
Downing Street insist speech was 'setting out broad context'
13:43
,
Athena Stavrou
Downing Street insisted the Chancellor’s remarks this morning had been about “setting out the broad context” for her decisions at the Budget amid questions about the intention of her speech.
Asked why the Government would not explicitly use the phrase “tax rises”, the Prime Minister’s spokesman said: “I think the Chancellor has been clear this morning that she is not going to get ahead of the Budget in a few weeks’ time.
“That will be set out then and not beforehand. But as I say, this morning was about setting out the broad context for that Budget. As she said, the public can see the challenges that we face.”
Asked what the point of the speech was, he said: “The Chancellor said she’d be upfront with the public about the problems facing Government, and that’s exactly what she did.
“People deserve to know about the economic choices we have to take, and why we have to take them, and that’s what she set out this morning.”
John Rentoul: Rachel Reeves came to reassure us… but ended up on the rack
13:31
,
Athena Stavrou
Watch: Rachel Reeves refuses to rule out hiking income tax, VAT or National Insurance in Budget
13:11
,
Athena Stavrou
'No more tax on business', industry leaders say
12:55
,
Athena Stavrou
Key business figures have urged Rachel Reeves to make sure there is ‘no more tax on business’ at her next Budget.
Jonny Haseldine, Head of Business Environment Policy at the British Chambers of Commerce, said the chancellor’s ambitions to grow the economy, reduce inflation and boost productivity will not be possible “if costs continue to pile up on firms”.
“That’s why our message is clear – no more tax on business,” he said. “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.”
Sean O'Grady: Forget alarm-clock Britain – Reeves was talking to the bankers
12:48
,
Athena Stavrou
Which taxes could rise at next Budget?
12:30
,
Athena Stavrou
Rachel Reeves appeared to pave the way for significant tax increases in a major pre-Budget speech, as she said “easy answers” were off the table.
Here are some of the other options the chancellor may be considering ahead of the Budget on 26 November:
Analysis: It won't just be those with the 'broadest shoulders' facing tax rises
12:30
,
Athena Stavrou
The Independent’s political correspondent Millie Cooke reports:
Rachel Reeves has given her strongest hint yet that she will raise income tax across the board, saying "we will all have to contribute" to building a new future for Britain.
This is a break from her typical insistence that "those with the broadest shoulders" would have to pull their weight to restore Britain's ailing public finances.
Instead, the chancellor appears to be preparing the public for tax rises that could hit even middle income earners - and those who are likely to come under the government's (admittedly vague) definition of "working people", in breach of their manifesto pledge.
Income tax rises or fairer reforms? Join The Independent Debate on the Budget choices facing Rachel Reeves
12:09
,
Athena Stavrou
Manifesto u-turn 'a sign of desperation'
11:59
,
Athena Stavrou
Rachel Reeves has been warned that if she backtracks on Labour’s tax promises, it could be seen as a “sign of desperation”.
“Increasing taxes to enable social investment is a good thing if planned effectively, but breaking manifesto commitments like this is a sign of desperation that could backfire economically and politically,” director of campaign group Compass, Neal Lawson, told The Times.
“This is the inevitable outcome of a hyperfactional obsession that rejects progressive economic arguments in the name of party control: the country is now paying the price.”
Chancellor must 'fix dysfunctional tax system' before ordinary households pay more - IPPR
11:43
,
Athena Stavrou
The Institute For Public Policy Research has said Rachel Reeves must “fix our dysfunctional tax system” before “asking ordinary households to chip in”.
Reacting to today’s speech, Carsten Jung, associate director for economic policy at IPPR, said: “The Chancellor is right to be straight about the fiscal challenges ahead and reiterate that cutting public spending is not the right answer to these pressures.
“Taxes will likely have to increase at the autumn budget, and there are ways to do this in a fair and pro-growth way.
“The fair thing to do is to reform our dysfunctional tax system to make those with unfair advantages contribute more before asking ordinary households to chip in. This can make the tax system more efficient and mean that investing in the UK remains attractive. With the cost of living a key focus, the priority must be to increase revenue to launch a war on bills.”
Badenoch: Government 'given up' on 'living within its means'
11:29
,
Athena Stavrou
Kemi Badenoch accused the Labour Government of having given up on trying to “live within its means”, saying that to do so “is not austerity, it is respect for taxpayers”.
The Tory leader said: “They talk about working people while making life harder and harder for people who actually work, and worst of all, they pretend that what they’re doing is all necessary.
“They pretend that they don’t have a choice. The reality is that they have given up trying to change anything.
“They have given up trying to get the Government to live within its means, and they have given up on not raising tax.
“That’s what Rachel Reeves was telling us this morning, and a Government that refuses to live within its means, while telling everyone else to tighten their belts isn’t being fair, that Government is being hypocritical.
“Getting the Government to live within its means is not austerity, it is respect. It is respect for taxpayers”.
Full story: Rachel Reeves prepares for tax rises in Budget as she tells nation: ‘we will all have to contribute’
11:18
,
Athena Stavrou
Watch live: The Independent’s Holly Bancroft give evidence to MPs on Afghan data breach
10:54
,
Athena Stavrou
Elsewhere in Westminster today, the Defence Committee is meeting over the Afghan data breach and super-injunction.
The Independent’s Social Affairs Correspondent Holly Bancroft is giving evidence to the committee.
Her reporting revealed that a huge Ministry of Defence data breach put the lives of up to 100,000 Afghans at risk and prompted thousands of them to be evacuated to Britain under a covert £7bn scheme – then was kept secret for almost two years by an unprecedented superinjunction.
You can watch live here:
FTSE 100 down after Reeves speech
10:46
,
Athena Stavrou
The Independent’s Business and Money Editor Karl Matchett reports:
The FTSE 100 is down 1.2 per cent this morning as markets react to the chancellors' speech - though the drop is far from entirely down to the chancellor's Budget plans.
Most major European indices were already in the red beforehand: France's CAC 40 is down 1.8 per cent, Germany's DAX is the same and the Euronext 100 isn't far behind at -1.6 per cent for the morning.
Among the London-listed stocks which are falling are the mining groups - Fresnillo, Glencore and Antofagasta are all down 2.5 to 4.3 per cent - while Primark owner ABF is down 3.7 per cent after lower profits and talk of splitting off the retail group.
That said, Reeves' chatter was hardly reassuring for businesses and the London Chamber of Commerce and Industry (LCCI) have already reacted by saying further tax rises would be "deeply damaging to both London and the wider UK economy".
Reeves reserves front row of her press conference for influencers
10:31
,
Athena Stavrou
The Independent’s political correspondent Millie Cooke reports:
Rachel Reeves controversially reserved two seats on the front row of the Downing Street press briefing room for social media influencers as she laid the groundwork for a swathe of tax rises at next week's budget.
It comes after it was revealed that the government forked out nearly £115,000 for “influencer marketing” in less than a year, despite pledges to cut wasteful spending.
The two influencers were given pre-selected questions at the press conference, which saw the chancellor argue "we will all have to contribute" to building a new future for Britain.
Badenoch brands chancellor's speech as 'one long waffle-bomb'
10:22
,
Athena Stavrou
Kemi Badenoch has criticised Rachel Reeves’ speech this morning, dubbing it “one long waffle bomb”.
“This morning we saw the extraordinary spectacle of a chancellor just days before a Budget, rushed into a panicked speech,” she said.
“We were told that this was the great moment that Labour would show they had the plan for growth. Instead what we got was a masterclass in managed decline.
“A chancellor claiming she’s just going to set the context, but instead of clarity business leaders are none the wiser, investors are confused, workers are anxious because the truth is Labour doesn’t have a plan to get Britain working again.”
The Tory leader added: “The chancellor’s speech was one long waffle-bomb. A laundry list of excuses, she blamed absolutely everybody else for her own choices, her own decisions her own failures.”
'Labour has given up': Badenoch
10:17
,
Athena Stavrou
Kemi Badenoch is delivering a speech now in response to the chancellor’s pre-Budget address this morning.
She said “Britain has stopped working” and that “Labour has given up”, criticising the government’s tax policies for businesses.
What is happening in Westminster today?
10:00
,
Athena Stavrou
It’s been a busy morning in UK politics, with the chancellor having delivered a rare pre-Budget speech earlier.
Sir Keir Starmer will now chair a Cabinet meeting.
Also happening imminently is a speech delivered by Tory leader Kemi Badenoch in Westminster.
At 11am, there will be Treasury questions in the Commons.
TUC: Reeves should consider capital gains tax before income tax
09:56
,
Athena Stavrou
There has been plenty of reaction to the chancellor’s speech this morning, including from the head of the Trade Union Congress (TUC).
TUC General Secretary Paul Nowak said the Budget must be “ambitious for Britain” and said Rachel Reeves is “absolutely right to focus on the improving the cost of living and rebuilding services”.
However he added: “Before considering income tax rises for higher earners, the government must do much more to ensure that the wealthiest pay their fair share.
“That includes looking at increasing capital gains tax, upping the tax on gambling companies and making the banks pay a little bit more after they cashed in on eyewatering profits.”
Analysis: Reeves message - buckle up Britain
09:47
,
Athena Stavrou
The Independent’s Whitehall Editor Kate Devlin reports:
Make no mistake, this is a key moment for this Labour government, and quite possibly a make - or-break speech for Rachel Reeves’ political career.
In it she set out what she sees as the difficulties in the UK economy ranging all the way back to the David Cameron era.
Be in no doubt - the chancellor was attempting to soften up the public to accept major tax rises in her budget.
She warned that we all “have to do our bit” to secure Britain's economic future.
Her core message to viewers this morning - in a speech timed to hit families as they eat their breakfast before the school run and drivers commuting into work- is that there is an awful lot of pain ahead.
Buckle up, Britain.
Borrowing costs fall but Sterling dips during speech
09:39
,
Athena Stavrou
The UK economy reacted to Rachel Reeve’s rare pre-Budget speech on Tuesday morning.
The value of sterling fell against the dollar and the euro in the wake of the Chancellor’s speech.
The pound - which was already lower ahead of the speech - fell 0.34 per cent to at 1.31 US dollars.
This is not far off last week's over two-year low against the single currency.
The FTSE 100 Index meanwhile fell deeper into the red after the speech, down 1 per cent or 92.5 points lower at 9608.9.
However, yields on UK government bonds fell to 4.38 per cent, while the 30-year yield dropped to its lowest level since April at one stage.
The gilt yield is the cost of borrowing money for the government.
The higher the yield is, the more interest is payable on the debt - which, as Ms Reeves has noted, is extremely high.
Wealth management firms warn speech is 'preparing ground for painful measures'
09:24
,
Athena Stavrou
Investment and wealth management firm Quilter have said Reeves’ speech is “preparing the ground for some painful measures”.
“Rachel Reeves’s pre-Budget speech was all about preparing the ground for some painful measures later this month,” Rachael Griffin, tax and financial planning expert at Quilter said.
“She knows this Budget will define her credibility, and her message today was clear that Britain’s finances are in a worse state than many realise, and everyone will be expected to play their part in putting them back on track.”
She added: “But while her argument against renewed austerity will appeal to many scarred by the last decade, it also lays the groundwork for a different kind of pain, which is higher personal taxes to rebuild public finances. She’s made it clear she is happy to be unpopular if it helps secure public finances.”
Analysis: Reeves refuses to rule out breaking manifesto pledges on tax
09:11
,
Athena Stavrou
The Independent’s Whitehall Editor Kate Devlin reports:
The chancellor today refused to rule out breaking her manifesto pledges on tax - to not raise VAT, national insurance or income tax.
She was repeating what the prime minister did at PMQs last week - failing to stick to a key promise Labour made to the public at the general election just last year.
Indeed, she was even asked “is it fair to put up income tax, as you probably will, when you can't get the welfare bill down” - an assertion she did not knock down.
In reality her speech was designed to highlight to the public that tax rises are coming.
The nation’s finances are in such a state that they will have to.
Ms Reeves’ speech today was about trying to ensure who gets the blame for that - as she pointed the finger at her predecessors.
But Labour now faces two key tests of faith with the electorate. Not just raising taxes, but also, crucially, breaking their promises not to.
Watch: Chancellor paves way for Budget tax hikes as she warns 'easy answers' won't fix economy
09:02
,
Athena Stavrou
Explained: UK borrowing costs fall
08:58
,
Athena Stavrou
The Independent’s Business and Money Editor Karl Matchett reports:
Government borrowing costs have fell as Rachel Reeves delivered her pre-Budget speech.
The 10-year gilt yield slid six basis points to 4.38 per cent, while the 30-year yield fell to its lowest level since April.
The gilt yield matters - in particular to the government right now - in two ways.
Firstly, it's the most important sign of the money markets trusting her moves, or at least that she'll do what she's saying she will.
Remember the Liz Truss debacle? The gilt yield on 30-year bonds shot more than 1 percentage point higher in the aftermath.
Secondly and more practically speaking, it's the cost of borrowing money for the government.
The higher the yield is, the more interest is payable on the debt - which, as Ms Reeves has noted, is extremely high.
Reeves refuses to rule out tax rises
08:52
,
Athena Stavrou
Rachel Reeves has refused to rule out hiking income tax, VAT or National Insurance to plug a hole in the public finances in a major pre-Budget speech.
The chancellor has hinted she will take painful decisions later this month as she said “easy answers” to fix economic issues would be “irresponsible”.
When asked whether she would raise taxes for working people, she said: “I will set out the individual policies of the budget on the 26th of November. That’s not what today is about. Today is about setting the context up for that budget.”
