Budget Blow: UK Faces Tax Hikes and Spending Cuts Ahead of Rachel Reeves’ Budget
Britain is bracing itself for a tough, profitable downtime as Chancellor Rachel Reeves signals the possibility of both duty rises and spending cuts in her forthcoming budget.
The warning comes as Ms Reeves prepares to unveil her alternate budget on 26 November, after reviewing a stark fiscal picture.
The Chancellor, who recently arrived in Washington, DC, for the IMF’s annual meeting, said the challenges ahead were significant.
“Of course, we’re looking at tax and spending as well,” Ms Reeves told this morning.
The OBR’s first draft report, shown to the Chancellor on 3 October, highlighted a potential £30 billion shortfall that must be addressed to meet fiscal rules.
Until now, Ms Reeves had not publicly confirmed any tax increases, and previous Cabinet signals had suggested spending cuts were unlikely.
She acknowledged the difficulty of the task, saying: “Nobody wants that cycle to end more than I do.”
The UK frugality is feeling the strain. Severance rose to 4.8 in the three months to August, marking a four-time high. Critics argue that the public insurance rise this time has discouraged businesses from hiring.
Shadow Welfare Secretary Helen Whately slammed the government, stating: “The only thing growing under Labour is the unemployment queue and the national debt.
Labor has killed growth and crushed jobs and livelihoods, with families paying the price.”
The IMF’s latest report paints a mixed picture. While it marginally upgraded UK growth to 1.3% for 2025, it downgraded next year’s forecast slightly to 1.3%.
At the same time, it warned that UK households will face the highest inflation in the G7 this year and next.
Inflation is now expected to hit 3.4% this year and ease to 2.5% in 2026, above the 2% target. Retail experts predict food prices could soar by 6% by year-end.
Ms Reeves said she was committed to tackling the financial hurdles, adding: “I was really clear during the general election campaign, and we discussed this many times, that I would always make sure the numbers add up… I won’t duck those challenges.”
Tory MPs have been quick to criticize the Labor Chancellor, claiming that her policies are “killing growth and crushing jobs.”
With families formerly facing record living costs, pressure is mounting on Ms Reeves to deliver a budget that balances financial responsibility with support for homes.
Judges advise that the coming weeks will be critical. Any duty hikes or spending cuts could have far-reaching consequences for both businesses and ordinary citizens, especially amid ongoing inflation and profit uncertainty.
The nation now watches as Rachel Reeves prepares to navigate one of the most grueling budgets in recent memory.
