On November 4, 2025, Chancellor Rachel Reeves stood outside Downing Street and delivered a speech that sent shockwaves through both political circles and financial markets. With the next Budget looming on November 26, Reeves made it clear: the United Kingdom faces tough economic choices, and tax rises are very much on the table. The address, rare in its candor and timing, was designed to prepare the public for what lies ahead—and to manage expectations amid mounting fiscal pressure.
Reeves did not mince words about the challenges before her. She pointed to a litany of issues weighing on the UK’s finances: the long shadow of Brexit, years of Conservative-led austerity, and a global environment beset by rising borrowing costs and international trade disputes. “We must deal with the world as it is, not how we wish it could be,” she said, as reported by The Guardian. She insisted that the current economic predicament was not of Labour’s making, but the result of “longer-term factors.”
In a move that has fueled speculation and concern, Reeves refused to recommit to Labour’s 2024 manifesto promises not to raise income tax, VAT, or national insurance. Instead, she told the nation, “If we are to build the future of Britain together, we will all have to contribute to that effort. Each of us must do our bit for the security of our country and the brightness of its future.” According to BBC News, she repeatedly sidestepped questions about sticking to those tax pledges, saying only, “We’ve got to do the right things.”
The financial backdrop to Reeves’s address is stark. The Institute for Fiscal Studies (IFS) has estimated that the Chancellor needs to find between £20 billion and £30 billion in additional revenue to restore fiscal headroom and meet self-imposed debt targets. This comes despite last year’s historic tax rises. The Office for Budget Responsibility is reportedly preparing to downgrade the UK’s productivity forecast by 0.3%—a move that could open up a further £20 billion hole in the public finances, as noted by The Independent.
Reeves’s speech was not just about the numbers, though. She framed the upcoming Budget as a choice between “investment and hope, or cuts and division.” Emphasizing her commitment to the National Health Service, reducing national debt, and improving the cost of living, she warned that the measures required could mean pain for taxpayers—particularly the wealthy and property owners. “Any Chancellor of any party would be standing here facing the choices I face,” she said, placing the blame squarely on previous governments and global shocks.
Market reaction was swift and severe. As reported by The Independent, the pound sterling fell to a six-month low, dropping 0.3% to $1.3064, while the FTSE 100 Index tumbled by 1%, or 92.5 points, to 9608.9. Economists and investors interpreted Reeves’s refusal to rule out tax hikes as a sign of imminent, significant changes to the tax landscape. A leading think tank warned that tax rises are “inevitable,” but suggested they could be implemented in ways that boost confidence and reduce child poverty and the cost of living.
So what tax measures are actually on the table? According to The Guardian and BBC News, Reeves is reportedly considering a proposal to raise income tax by 2p on the pound while cutting national insurance by the same amount—a move aimed at spreading the tax burden to landlords and pensioners. This would break Labour’s manifesto commitment not to raise income tax, VAT, or national insurance, a point not lost on critics and opposition parties.
Other potential measures include freezing personal tax thresholds, which could raise £7.5 billion if done for two years. The freeze on income tax thresholds, originally implemented by the Conservatives, means the threshold at which a person moves up the income tax rates remains static rather than increasing with inflation. This so-called “stealth tax” has already generated billions in new revenue and could be extended.
Reeves has also left the door open to changes in capital taxes and inheritance tax. The government is reportedly considering bringing most unused pension funds and death benefits within the value of a person’s estate for inheritance tax purposes starting April 6, 2027. There is also talk of introducing a lifetime cap on the amount of money a person can give to family members without incurring tax, as well as rolling back planned changes to inheritance taxes on farms.
Perhaps most controversially, sources have suggested that a national property tax might replace stamp duty on owner-occupied homes worth more than £500,000. Under this plan, the tax would be paid by owner-occupiers when they sell their home, with the rate determined by the property’s value. A so-called “mansion tax” is also under consideration, featuring an annual 1% charge on properties valued over £2 million—a move that could see owners of £3 million homes paying £10,000 a year.
Pressure is mounting from within the Labour Party as well. Former Prime Minister Gordon Brown and other Labour backbenchers have campaigned for higher gambling taxes, suggesting an increase in levies on online gambling from 21% to 50%. There are also calls to raise taxes on banks, though this has drawn warnings from industry leaders about the impact on the financial sector. Reeves has responded, “I didn’t need MPs or former chancellors to tell me to launch an inquiry into gambling taxation. I did that as chancellor, and I’ll set out the plans on the taxation of gambling—and indeed of other areas—in my budget on 26 November.”
Politically, the fallout has been immediate. Shadow Chancellor Sir Mel Stride accused Reeves of fueling panic and uncertainty, saying, “All she’s done is confirm the fears of households and businesses—that tax rises are coming.” Conservative leader Kemi Badenoch dismissed the speech as “one long waffle bomb,” accusing Labour of lacking a coherent plan to get Britain working. Meanwhile, Scottish Labour leader Anas Sarwar distanced himself from Reeves’s position, promising to cut income tax if elected in Scotland and noting that taxes are “too high” north of the border.
Despite the criticism, Reeves’s team has remained unapologetic. Her spokesperson told reporters, “No regrets,” when asked about the prospect of breaking Labour’s manifesto pledges. Sir Keir Starmer’s spokesperson echoed this sentiment, stating, “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.”
With the Budget just weeks away, Reeves’s speech has set the stage for a period of uncertainty and debate. The Chancellor has made it clear that tough decisions are coming, and that the government will “do what is right rather than what is popular.” Whether the public will accept her framing of the crisis—or see it as a betrayal of Labour’s election promises—remains to be seen. For now, all eyes are on November 26, when the details of the fiscal package will finally be revealed.
