Chancellor Rachel Reeves’ much anticipated speech at Downing Street this afternoon will be key. This address is delivered just before the next Budget, set for 26 November. According to economic prognosticators, only tax increases can bring enough revenue to gird government finances. In response, Reeves plans to strike some “fair balance” with her fiscal policy.
The Chancellor’s speech comes on the heels of economists’ warnings that the changed economic landscape may necessitate tax increases. These are important measures to help balance the books the right way. Reeves does seem to have a non-negotiable hard and fast rule when it comes to government finances. So she will stop borrowing to fund day-to-day public spending before the end of this parliament. Further still, she wants government debt to be falling as a share of national income by the same date.
In March 2025, Reeves had already tentatively announced a headroom of £9.9 billion against her fiscal rules. The Resolution Foundation has gone further in calling on her to double this to £20 billion. That’s why they caution that trends in the overall economy or significant policy reversals soon could make her current fiscal cushion a fiscal black hole of nearly £4 billion. As the FT reports, the think tank cautioned that her small margin for error risks sowing instability. If so, she’ll be left to “limp from one forecast to the next.”
In this speech, Reeves will most likely be laying out how this first Governor’s Budget will continue to focus on Governor Reeves’ principles of “fairness and opportunity.” She has ambitious plans to tackle major challenges like NHS waiting lists, the national debt and the cost of living crisis. In a time of unprecedented uncertainty, she’s made clear that across-the-board tax increases and across-the-board spending cuts are both on the table. Her goal would be to leave “enough headroom” for surprise economic tough times.
Reeves’ Treasury Minister, Torsten Bell, previously served as the chief executive of the Resolution Foundation, which has been vocal about the potential impacts of her fiscal decisions. The original input was cut, assuming the main point would be clear to readers. National and state transportation policy experts agree that such cuts would do more harm than good. They went so far as to recommend that income tax be raised. This alternative would raise £6 billion and do so while doing the least harm to the majority of wage earners.
The Chancellor should announce an extension of the freeze on personal tax thresholds for a further two years beyond April 2028. Fiscally this would be a popular move easily raising £7.5 billion according to our forecasts for the Autumn Budget 2025.
“You will all have heard a lot of speculation about the choices I will make,” Reeves acknowledged ahead of her speech.
“But it is important that people understand the circumstances we are facing, the principles guiding my choices – and why I believe they will be the right choices for the country.” – Chancellor Rachel Reeves
Ceaseless pressure continues to mount for the Chancellor to set out her fiscal plans. She has her heels dug in, determined to produce a budget that fulfills her promise of “A Labour Budget based on Labour values.” She’s shown that she won’t hesitate to make hard but just decisions. Her vision is to build and renew the nation’s infrastructure—to last, and in a way that creates long-term prosperity.
As stakeholders await further details from Reeves’ address, her ability to navigate these challenges will be closely scrutinized, particularly given the current economic climate and its implications for public finances.