(Nov 4): Chancellor of the Exchequer Rachel Reeves declined to reiterate Labour’s manifesto commitment against broad-based tax hikes, as she made an unusual appeal to the British public to support her upcoming budget.
In a rare pre-budget speech in Downing Street carried on national broadcasters, Reeves argued she would prioritise bringing down borrowing costs and inflation, and blamed the previous Conservative administration for putting lasting pressure on the public finances.
In the clearest hint yet that the Labour government will compromise on its commitment to avoid lifting the UK’s main tax levers, Reeves said the world had changed since it came to power in July 2024.
“We were elected on a commitment to put country before party, the national interest before political calculation,” she said.
“My focus will be on getting National Health Service waiting lists down, getting the cost of living down, and also getting the national debt down.”
Borrowing costs have risen since Reeves’ last fiscal event in March, adding billions in extra debt repayments, while the government was forced to shelve major cuts to welfare spending in the summer following a rebellion by Labour members of Parliament.
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Reeves lifted taxes by around £40 billion (US$52 billion) at last year’s budget, which she promised at the time was a one-off move for raising revenue. However, she said on Tuesday that previous Conservative policies around austerity, Brexit and the handling of the pandemic have left a worse inheritance than previously thought.
She also blamed global trade frictions in light of US President Donald Trump’s trade war.
“Years of economic mismanagement has limited this country’s potential,” the chancellor said in the televised speech. “At the budget last year, I fixed the foundations, dealing with the aftermath of Liz Truss’s disastrous budget,” Reeves added, “But since that budget, the world has thrown even more challenges our way.”
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Reeves reaffirmed her commitment to the UK’s “iron clad” fiscal rules.
Gilts briefly jumped as Reeves spoke on Tuesday, with 30-year yields hitting the lowest since April. But they pared that move after the speech fell short of providing concrete details of her plans.
The pound fell to a seven-month low of US$1.3087.
“No accounting trick can change the basic fact that government debt is sold on financial markets,” Reeves said. Some members of her Labour party have argued that the rules could be relaxed to free up more public spending.
The opposition Liberal Democrats said the speech “wasn’t pitch rolling, it was pointless”. Its Treasury Spokesperson Daisy Cooper warned: “It’s clear that this budget will be a bitter pill to swallow as the government seems to have run out of excuses.”
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