Rachel Reeves today laid out her plans to raise taxes based on what she termed “years of economic mismanagement” by the Tories and changing world events which had driven up borrowing and contributed to low growth.

In a rare pre-budget address in Downing Street, the Chancellor made it clear that  “each of us must do our bit”, which was taken as a clear indication of across-the-board tax rises.

She said that since last year’s statement President Trump had imposed tariffs, inflation remained stubborn, interest charges on government borrowing were higher than expected, and there had been a need to increase defence spending.

She pointed to an “ill-conceived Brexit”, weak public investment and sluggish productivity growth as presenting major challenges for the British economy.

“All this meant when the pandemic arrived, the country was underprepared,” she said.

Ms Reeves said that in last year’s Budget she had put public finances on a firm footing and begun rebuilding the economy.

She understood the call for “easy answers” but said Britain was saddled with a £2.6 trillion national debt which is 94% of GDP. One pound in every ten pounds of taxpayers’ money is spent on interest payments.

She said that she was not seeking “to do what is popular, but to do what is right” and she would help business and focus on growth.

Setting out her plans to cut NHS waiting lists, national debt and the cost of living, she steered clear of specific announcements that will be left to the Budget on 26 November.

The government’s official forecaster, the Office for Budget Responsibility (OBR), is expected to downgrade its productivity forecasts for the UK.

Ms Reeves said: “Forecasts are not visions of the future, they are a look in the rear view mirror.”

Tory leader Kemi Badenoch called the chancellor’s speech “a waffle bomb, a laundry list of excuses”, while the Lib Dems said the Budget “will be a bitter pill to swallow”.

Market reaction

The FTSE 100, which fell more than 100 points soon after the Chancellor’s speech, ended the session up 13.59b points, or 0.1%, at 9,714.96, while sterling was down 0.8% against the dollar at 1.303

“Rachel Reeves’ unusual stance of giving a big speech on the eve of the Budget has left investors with more questions than answers, and done nothing to remove uncertainty around taxes,” said Dan Coatsworth, head of markets at AJ Bell.

“The bond market would be happy if the chancellor raises taxes as it would help to improve public finances and make the UK less risky from an investment perspective. It was telling that the 10-year gilt yield fell as Reeves began her speech, indicating that bond investors thought we’d get confirmation that taxes would go up at the Budget. But as it became clear that Reeves was merely dancing around the topic, yields went back up.

“The chancellor said the speech was about giving context to the challenges facing the government, but she batted away questions about taxes faster than an Olympic table tennis player.

“Many people are fed up with this game. There are growing calls for the chancellor to be crystal clear in her plans and make bolder decisions. No-one will be shocked at tax rises and many people believe it is better to sort the situation out once and for all, rather than keep tinkering at the edges. This feels like Reeves’ last chance to fix the house, otherwise her days could be numbered.”

Nigel Green, CEO of deVere Group, said: “Rachel Reeves’ surprise 8am Downing Street address this morning was the clearest signal yet that tax rises are coming.

He said the Chancellor’s silence on specific tax pledges “isn’t hesitation, it’s intent.”

“Governments test language carefully before they act. When ministers refuse to repeat categorical assurances, it’s deliberate,” he said. “This is choreography. The message, we believe, is pretty clear: tax rises are coming. Get ready.”

Energy groups unite in latest call to scrap EPL

Offshore Energies UK and Scottish Renewables have written to the Chancellor urging her to scrap the energy profits levy, or windfall tax, in the latest move to warn of the damage being done to the energy sector.

It follows a letter backed by more than 110 companies, sent last month calling for the tax to be replaced by a fair, permanent tax regime by 2026.

The industry says the EPL, introduced in 2022, was meant to raise billions from record profits during the energy crisis.

Instead, revenue projections have collapsed. The Office for Budget Responsibility has cut its forecast from £41.6bn to just £17.4bn – less than half the amount ministers expected.

OEUK argues that if the tax is reformed as proposed, the industry could inject £137bn into the UK economy by 2050, generate £41bn of new investment and support 23,000 additional jobs by 2030. It would also deliver £12bn more in tax receipts.

See also:

Reeves tax plan may wipe £1 billion off Scottish budget